Punjab agriculture minister Malik Ahmad Ali Aulakh has said that wheat production target for the Rabi season 2010-11 has been set at 25 million ton, some 1.5 million ton above the assessed national food requirement at 23.5 million ton.
With the prices of sugar skyrocketing, the Council of Common Interests agreed on Monday to a proposal of the federal government to end the role of the Trading Corporation of Pakistan in import and supply of sugar, giving a free hand to millers and wholesalers to determine its price. The move, according to an official, was in compliance with an IMF condition to end subsidy on food items. This means the government will no longer provide subsidised sugar to consumers through utility stores or open market.
The Finance Minister said that IMF has linked the release of next tranche of the $11.3 billion Stand-By Arrangement (SBA) with concrete progress on RGST and reforms in the power sector. Sources said that the Finance Minister told the meeting that introduction of RGST Bill in the Parliament was 'must' to ease the concern of the lending agency prior to the next round of talks after the Pakistan Development Forum.
"Ministries and Divisions have, therefore, lodged strong protest with the Planning Commission," sources said, adding that the staff who were working on different development projects are no longer being paid. Following the direction of Finance Division, the Planning Commission has proposed to slash Rs 70 billion federal component of PSDP 2010-11 due to financial constraints in a summary moved to Prime Minister in October 2010 for formal approval. "But Prime Minster Secretariat has not conveyed any formal decision in this regard," sources added. The government had earmarked Rs 280 billion as federal component for current financial year's PSDP. The Planning Commission has also recommended cancellation of Rs 89.27 billion budgetary allocation for around 258 new projects (with total cost of over Rs 698.38 billion) from the current financial year's PSDP and diverting these funds to rehabilitation of the flood-hit areas.
Pakistan Cotton Ginners Association (PCGA)'s Chairman Chaudhry Masood A Majeed and Vice Chairman, Nawab Shehzad Ali Khan opposed the imposition of RGST terming it disastrous for ginners as well as cotton growers. Government should not implement this unjust tax otherwise industry will be forced to close its factories.
A extraordinarily panicked newly-elected central Chairman of Pakistan Readymade Garments Manufacturers & Exporters Association (PRGMEA) Ejaz Khokhar has therefore, suggested revival package including capping the utilities prices for industry, suspension of Export Development Fund (EDF), collection forthwith, abolition of taxes (including Reformed General Sales Tax), special mark up rate and smooth flow of raw materials to the textile ancillary industry.
Showing posts with label economy. Show all posts
Showing posts with label economy. Show all posts
Tuesday, November 9, 2010
Sunday, November 7, 2010
Meanwhile, the protests of powerlooms owners have been entered into the second week. They observed black day and staged protest carrying black flags and banners at front of their factories. Briefing to media, Chaudhry Salamat Ali, Chairman, Pakistan Hosiery Manufacturers and Exporters Association (PHMA) North Zone demanded that the export of cotton and yarn should be banned to control the growing day-by-day rates of raw material, which hampering the textile industry and three million labourers livelihood. Chairman, PHMA, North Zone demanded to the government that the export of cotton and yarn should be totally banned till meeting the demands of the domestic sector and should be eliminated the monopolists and capital mafia, who are adding fuel to the fire by their speculative activities ignoring the national interests. Wasim Latif Chairman, and Adil Manzoor Ellahi Vice Chairman Pakistan Textile Exporters Association in a press statement demanded duty free import of polyester fibre to cover the shortage of 20 percent of cotton crop washed away by floods and 30 percent demand supply gap of polyester fibre in the country.
The prices of the entire range of essential kitchen items have jumped up by 10 to 30 percent within last one week in the twin cities of Islamabad and Rawalpindi, according to a survey conducted by Business Recorder. Traders in Rawalpindi/Islamabad wholesale markets told Business Recorder that prices of most of the food items have risen subsequent to the increase in prices of petroleum products.
Briefing the media persons spokesperson to the President Farhatullah Babar said that the meeting was part of the interactive sessions the President has been regularly holding with private entrepreneurs in search of solution to the country's economic woes.Issues ranging from reconstruction of flood areas to inflation and from engaging private entrepreneurs in mega development project to raising equity from stock markets for infrastructure projects were discussed in the meeting, he said.
State Minister for Economic Affairs, Hina Rabbani Khar on Friday said that Pakistan needs $1.93 billion for the recovery and rehabilitation of flood-stricken people. She said this while addressing 'Launching of Pakistan's Floods Relief and Early Recovery Response Plan 2010' ceremony jointly organised by the United Nations (UN) and National Disaster Management Authority (NDMA) here on Friday.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Sultan Ahmed Chawla has urged the government not to borrow a single penny from the IMF, Word Bank or any other institution in future rather it should seek moratorium for five years to help country get out of loan trap. Pakistan is in critical situation now only due to mismanagement and imposition of one sided decisions and it has been shunting the economy to destabilisation. He said IMF package has only provided the poverty not prosperity.He also emphasised to privatise the Railways, Steel mills and PIA in the vested interest of Pakistan. It will accelerate the economy to boost up in well manner. He also suggested overcoming the crisis of electricity, the offers from China and Iran must be considered. But in the long term dams must be constructed at any cost.
There are three major conditions which the government has failed to comply with. Firstly, failure to begin implementation of the value-added tax, renamed as the Reformed General Sales Tax (RGST) by the incumbent Finance Minister Dr Hafeez Sheikh in an effort to dispel few domestic controversies over the proposal. Secondly, failure to effect reforms in the energy sector that include full cost recovery through elimination of subsidies not expected to be supported by the general public still smarting under the recent 9 percent escalation in prices of petroleum products, in line with the rise in the international market; and to reduce the subsidy on electricity by increasing the tariff by 2 percent every month until end June 2014. Thirdly, government excessive borrowings from the central bank due to delay in reimbursement of Coalition Support Fund. The implementation of both these policy options requires strong political will owing to fear of a political backlash... Economists no doubt would point out that compliance with these conditions must be viewed as a short-term measure and that the long-term measures must include a long standing demand of the public, that is now echoed by the international donor community: tax the elite across-the-board on the one hand, reduce corruption and budgetary support of the state-owned enterprises and stop government profligacy on the other. According to media reports, the visiting International Monetary Fund (IMF) team has criticised the government's slow progress in complying with two conditions of the November 2008 Stand-By Arrangement (SBA): implementation of the value added tax (reworded as the Reformed General Sales Tax by incumbent Finance Minister Dr Hafeez Sheikh) and power sector reforms that include the ending of all subsidies in an effort to move towards full cost recovery.
Prior to denigrating the IMF for interfering in our macroeconomic policy decision-making, three factors need to be acknowledged. First and foremost, it was the federal government that approached the IMF seeking the SBA; and if reports are accurate, it was the federal government that sought US mediation to convince the IMF to support Pakistan through the 7.3 billion dollar assistance in the first place. Second and related fact is that the economic havoc created by the PML (Q) government and the caretakers in 2007, in a blatant attempt to win over voters for the scheduled February 2008 elections, led them into taking decisions that were untenable from an economic perspective. These decisions included extending a hefty and unsustainable subsidy for petroleum products that seriously compromised the budget deficit, propelling inflation on the one hand and inter-circular debt on the other. Such unsavoury decisions compelled the PPP-led government to seek the SBA in the first place. And third, the IMF conditions that the government has yet to comply with are economically sound given certain assumptions. These include: (i) the refusal of the government to impose a tax on the elite that includes a tax on the income of rich landlords; (ii) the need to improve governance, which must include appointing heads of state-owned entities (SOEs) on merit rather than on the basis of nepotism. The fact that the ruling party has selected heads of SOEs on the basis of nepotism became evident in the National Insurance Company Limited, the Pakistan Steel Mills, OGDCL and the Pakistan International Airlines. Thus significant economies could have been affected if these companies had been headed by competent people who would have ended their heavy reliance on budgetary support; and (iii) reduce non-development expenditure... The latest reports reveal that the federal government would have to raise power tariffs by about 2 percent per month to be able to meet this target, an amount that is expected to have a very high political cost, especially with all the political parties, including those which are in coalition with the government, lamenting the fact that the PPP-led government did not take them into confidence while raising the price of petroleum products by about 9 percent this week.
The All Pakistan Textile Mills Association (Aptma) is going to hold a crucial meeting on energy crisis with the Federal government on Monday in a situation where gas supply to industry is already in doldrums ahead of winter season. The Aptma delegation, under the leadership of Chairman Gohar Ejaz, will call on Federal Minister for Textile Farooq Saeed and Federal Minister for Petroleum Naveed Qamar... He said a hurried landing of Federal Petroleum Minister in Lahore during last week had also failed to develop tangible improvement. According to him, the judicious economic contribution of textile industry was far ahead of the fertiliser industry and the CNG pumps, as 15 million direct and indirect workforce is attached to the textile throughout the country.
The government will sign an agreement with American based seed producing company Monsanto by the end of December, 2010, Business Recorder has learnt. The Ministry for Food and Agriculture (MinFa) and the American seed company Monsanto had singed a Memorandum of Understanding (MoU) on April 10, 2010 for providing Bt Cottonseed to Pakistan.
He admitted that the PPP government after coming into power took some unpopular decisions in the larger interest of the country like withdrawing subsidies on utilities to save national economy from crisis. He said that the increase in prices of petroleum products was necessary to avoid deficit of Rs 100 billion.
The Friends of Democratic Pakistan (FoDP) forum has issued a warning to the Government of Pakistan (GoP), saying that its energy crisis would become unmanageable by 2015-16 if it failed to introduce a 5-point recovery plan for immediate overhauling of its entire power infrastructure. The 5-point plan stresses urgent need to rationalise electricity prices and do away with subsidies. Other salient features of the plan are strengthening energy sector governance and regulation, developing energy finance capability, maintain energy efficiency into energy policy and fast track investment projects for energy security. The FoDP noted during the deliberations on a strategy to help Pakistan overcome its energy crisis that Pakistan's energy crisis was worsening fast as its present energy gap of 18 million metric tons of oil (MTEO) will grow to unmanageable 56 MTEO by 2015-16 and simultaneously energy import requirements will increase from $10 billion to $38 billion.
However, Secretary Finance, Salman Siddique claimed that good progress had been made during the policy-level talks with the IMF, saying that "I think we are almost there. We focus more on getting the things out of the way and a meeting of provinces has been convened on Monday to evolve consensus on RGST". Salman said good progress was also made towards budgetary framework. "We will try to place RGST before the current session of the Parliament and there would be a signing off with the World Bank and Asian Development Bank (ADB) of reformed plan of energy sector prepared by Deputy Chairman Planning Commission," he said. Replying to a question, he said that Pakistan had received $8.6 billion from the $11.3 billion total augmented SBA. He evaded a question that how the 4.7 percent fiscal deficit for the current fiscal year allowed by the IMF would be achieved. According to him, the tax target for the outgoing fiscal year will be Rs 1,650 to Rs 1,655 billion.
Major businesses including petroleum, textile chemical and other zero-rated sectors are facing serious liquidity problems as the Federal Board of Revenue is reluctant to issue SOP for processing their billions of rupees sales tax refunds, manually, Business Recorder learnt on Thursday.
Federal Public Sector Development Programme (PSDP) has been slashed to Rs150 billion from Rs 280 billion. Both sides have also agreed to cut the provincial annual development programmes by 50 percent... The foreign inflows for budgetary support would fetch only around 0.6 percent of GDP as creditors were not ready to extend money directly to the government owing to lack of confidence in the leadership, said official sources who did not want to be identified. The government would have to arrange most of the financing from domestic sources, they said. Pakistani authorities informed the IMF staff that Sukuk bonds would be issued in the domestic market to raise Rs80 billion in the current fiscal year.
Foreign inflows and developments on an important loan tranche for the country are likely to drive the Karachi share market next week, dealers said. “Foreigners’ interest in the market is expected to offer significant support,” said Saeed Khalid, an analyst at Invest Capital. He said any positive news regarding the fifth tranche from International Monetary Fund (IMF) and other disbursements by International Finance Institutions (IFIs) would also pump up activity in the market. Investors were encouraged by the breakthrough reached in the talks between the IMF and the Pakistani officials, who agreed on revising fiscal deficit target to 4.7 percent, eliminating the circular debt, public listing of power companies and presentation of a new sales tax bill in the Parliament’s current session, dealers said. This offered some hope with respect to the release of the fifth tranche under the Standby Arrangement, they added.
Consumer loans fell 17 percent in financial year 2009-10 as the public income remained hostage at the hands of raging inflation, the central bank said in a recent report.
Though default rose 33 percent in 2009-10 mainly on the back of mortgage and personal loans, it is unlikely to grow further, or at least not with the same rate, amid shrinking consumer credit, analysts said. “Our economy is scantly leveraged and banks have a customer of choice in shape of the government,” said Khurram Shehzad, Analyst at Investcap Securities. “They are taking the easiest way of pumping money to the government.” The government breached IMF quarterly ceilings on borrowing from the banks during first half of the current year. It provides banks a risk-free investment avenue to avoid riskier options, such as consumer loans. “The State Bank needs to wean them off. They (banks) are supposed to channelise funds to the whole economy,” Shehzad said... In a country where only three million people use banks, barely one percent resort to mortgage unlike other developing or developed countries where the rate is much higher.
In a meeting with bed linen exporters, the former minister, Humayun Akhtar Khan, said the interest rates have been cut globally to encourage businesses while in Pakistan, the situation is exactly otherwise. “The economy is sustaining on the IMF loans and the government is blindly following its dictations,” he said. Akhtar said that the foreign direct investment (FDI) must be channelised into export-based industries, not just in telecom and power sectors, to strengthen the economy.
Although tobacco cultivation occupies a relatively small area of 0.27 per cent of the total irrigated land in the country and about 3 per cent in Khyber Pakhtunkhwa, it is a chief source of revenue, employment and foreign exchange earnings to the economy. Being a highly labour-intensive crop, about 80 thousand persons are involved in its cultivation, fifty thousand are engaged in cigarette factories of the tobacco industry and another one million find indirect employment through its trading.
Experts also highlighted that reconstruction activity in flood-ravaged areas has so far been slow and limited. They say that so far there has not been any significant increase in demand for cement and other construction materials due to reconstruction efforts.
Drive down towards Taunsa barrage on the Indus River and you might see something peculiar. On the right hand, behind the bund connecting to Taunsa Barrage are acres upon acres of lush farms growing cotton and sugarcane. According to select irrigation officials, the MPA, Sabit Nazim and eyewitnesses living in the area, these areas (ponds) are government land, previously part of the old river bed, and serve as ponds where water can be redirected in case of excessively high water levels during floods. It is also an area with almost no or negligible settlement. On the other hand, the left bank of the river, where the breach took place, is populated. The ponds on the right side, where the eye needs to look far and wide to see human life, are empty of water. No one can confirm who these lands belong to or why they are dry while the left side is flooded. But whisperings of powerful interests that wanted to protect their lands thrive, and the hope is that the tribunal can help prove, or disprove, that this was the case.
Everything was working fine for Faheemullah, 25, a miner from Peer Sabak village of Nowshera district in Khyber Pakhtunkhwa till August 2; the day flood hit his area. "I was earning Rs300 after working 12 hours a day in the mountains which was enough money to support my family. Since floods have hit our area everything has finished for me. I have lost my home as well as job. I am ready to work to earn money for my family but the contractors have disappeared as the communication infrastructure has wiped out and there is no way to get marble and precious stones out of mountains", he says, adding, "more than 1500 miners were working only in Nowshera. All of them have lost their jobs after the floods. I have contacted my contractor and he has told me that it would take at least six moths to start mining work in the mountains" he says... International Labour Organisation (ILO) has estimated that more than 5.3 million jobs may have lost or affected as a result of mega floods hit Pakistan.
The existing tax system protects exploitative elements having monopoly over economic resources. The poor are paying an exorbitant sales tax of 17pc to 23pc (in fact 40pc on finished imported goods after customs duty, special federal excise duty, sales tax after mandatory value addition and income tax at source) on essential commodities. But the mighty sections of society such as absentee landlords, big industrialists, generals and bureaucrats are paying no wealth tax/income tax on their colossal assets/incomes. It is tragic that in a country where the rich make billions on a daily basis, tax-to-GDP ratio is pathetically low at 9.8pc... There is an urgent need to tax wealth and income of the rich and mighty. Rent of agriculture land derived by absentee landlord should be taxed so heavily that they are forced to give up ownership -- these lands should be with the tillers who produce agriculture produces. The corporate rate should be brought down to 20pc to promote industrialisation, but any director or other office holder (having more than 20pc shares) drawing annual salary exceeding Rs5 million should be taxed at the rate of 50pc... The government should launch programmes, financed mainly through taxes, to solve the twin problems of unemployment and poverty. These welfare-oriented schemes may also include subsidised/free medical and educational facilities, low-cost housing, and drinking water facilities in rural areas (especially flood-ravaged ones), land improvement schemes, and employment guarantee programmes. Once people see tangible benefits of the taxes paid, there will be better response to tax compliance. Taxes cannot be collected through harsh measures and irrational policies. It is high time politicians, judges, civil-military high-ups and public office holders made public their tax declarations.
On November 25, 2008, the International Monetary Fund (IMF) approved the $7.6 billion standby arrangement for Pakistan to be delivered over 23-month, which was later enhanced to $11.3 billion in July 2009. One of the demands of the lender was introduction of Value Added Tax (VAT) from July 1, 2010. It was deferred to October 1, 2010 and now IMF has suspended release of the last tranche unless it is implemented as FBR failed to introduce RGST after lapse of the deadline fixed by the government in the budget speech of Finance Minister... There is no political will to tax the rich and mighty. They have not pointed this out in their recommendations (sic). Instead of more taxes we need reduction in excessive marginal tax rates making them compatible with other tax jurisdictions of the world, especially Asia. Elimination of GST on production, machinery and equipment is the need of the hour to promote industrialisation, but they have advised otherwise. The current external debt of Pakistan stands at $ 55 billion. That figure will jump to $73 billion in 2015-16, as debts that were rescheduled after 9/11, in exchange for Pakistan's co-operation in the war on terror, will come back into action. Besides this, Pakistan is paying over $ 3 billion on debt servicing every year on average. As for the FY 2010, this amount is $ 5. 640 billion, which Pakistan will be paying to its creditors amid 20 million people crying for most urgent basic needs; food, clothes, shelter, health and education... Pakistan's debt repayments already amount to three times what the government spends on healthcare -- in a country where 38 percent of under 5-year-olds are underweight, only 54 percent of people are literate, and 60 percent live below the poverty line... Thus, under the present circumstances, it is almost impossible for the government of Pakistan to meet basic requirements of its millions of displaced people as the international response to Pakistan is far less than the Tsunami and Haiti disasters -- the world community has only provided $229 million to Pakistan so far. This translates into $16.16 for each affected Pakistani person as compared to $1,087 every affected person in Haiti and $1,249 per affected person in the Indian Ocean tsunami.
All these three parties are not only coalition partners in the Sindh provincial government but are also partners in the federal government. The coalition governments have been marred by mutual distrust and an increasing observable unease, sometimes volatile, when it comes to the identification of those accused of murders and arson as well as the dispersal of government jobs. The leaders of triangular political forces of Karachi -- PPP, ANP and the MQM -- on a number of occasions went an extra mile to keep tensions in check, but the provincial leaders and workers of the coalition partners are far from any conciliation mood. The third emerging ethnic force in Karachi, the NAP was able to extract two provincial assembly seats in Karachi, much to the dismay of the MQM, on the basis of growing Pashtun population in the city. The Guardian, while reporting Imran Farooq's murder, pointed towards the MQM's "longstanding rivalries with ethnic Pashtun and Sindhi parties in Karachi," and added that "the MQM has also been riven by occasional internecine violence".
The deposit holders get negligible returns on their savings, while the banks are earning mark-up between 12 to 18 percent from borrowers -- this is the worst kind of exploitation one can think of. Even the governments -- federal and provincials -- borrow funds at exorbitant rate of nearly 14 percent from private banks. Nowhere in the world such a wide spread of earning is available to banks -- adding insult to injury they call it profit and loss sharing. One wonders what the regulator, State Bank of Pakistan (SBP), is doing... The State Bank of Pakistan, during a suo motu case before the apex court has admitted that financial institutions wrote off Rs256 billion loans from 1971 to 2009. During the self-acclaimed transparent era of Musharraf-Shaukat, loan write-offs in just seven years (2000-2006) crossed the figure of Rs125 billion, whereas in the much-publicised corrupt eras of elected governments (1985-1999) it was just Rs30 billion. This comparison speaks for itself and does not require any further comments... The new owners made billions as banks were sold at discounted prices and money realised from so-called privatisation was not used for external debt retirement but for the benefits of rulers. In the entire process, the country lost billions of rupees. The nation also suffered revenue losses of Rs120 billion as bad debts written off by the banks under the SBP's amnesty scheme enjoyed tax exemption. In 1990, the Auditor General of Pakistan issued a detailed audit report questioning the authority of Board of Revenue to issue administrative instructions for allowing bad debts. It is quite understandable how the Board of Revenue and SBP, in the presence of this audit report issued further concessions to the borrowers and banks.
The small pack of chocolate on sale cost Rs20 and the bigger one Rs30. Hazrat Bilal said he and his father bought the smaller pack from the IDPs for Rs11 or 12 and made profit of eight to nine rupees on each pack. It was strange to find out that the foreign donors had sent chocolates instead of something useful for the IDPs, who thought they couldn't afford the luxury and would be better-off selling it to make some money and use it to buy items of essential use. Another interesting observation was that Hazrat Bilal and most other sellers of relief goods were Afghan refugees. They were buying these goods from Pakistani IDPs and then selling to needy Pakistanis. Having been involved in the business of selling and buying relief goods for years, the Afghan refugees are able to do a better job in earning their livelihood in this manner. This was evident from the initially poor response to the UN Appeal for emergency international assistance for the IDPs. The UN appealed for $ 543 million to cover the cost of looking after the needs of 1.5 million IDPs for the six-month period ending December 2009. Until the end of May, it had received $ 88 million only constituting 16 per cent of the appeal. Though the response to the appeal for donations improved subsequently, the needs too kept rising with the displacement of more people and extension of the zone of conflict to new fronts in tribal areas such as South Waziristan, Orakzai and Kurram.
The economy, according to the IMF, was picking up before the floods hit the country. The real GDP grew by 4.1 percent, the current account deficit narrowed to $3.5 billion (2 per cent of GDP) and both exports ($19.63 billion) and remittances ($8.90 billion) went up during the last financial year (FY10). However, the budget deficit surpassed the 5.1 percent revised target to reach 6.3 per cent of GDP... On the basis of data provided by the Pakistan government, the IMF has predicted that during the current fiscal year, real GDP growth will come down to 2.8 percent ($190.20 billion) from the pre-floods estimates of 4.3 percent ($190.66 billion); the current account deficit will increase to 3.1 percent ($5.86 billion), 0.6 percentage points higher than the pre floods estimates of 2.5 percent ($4.62 billion); inflation will rise to 13.5 percent from 11.7 percent estimates before the deluge; exports and imports will grew by 3 percent and 8.7 percent respectively compared with earlier estimates of 4.7 and 6.9 percent resulting into trade deficit of $13.52 billion... The devastation wrought by the floods is so enormous that the Pakistan government cannot cope with it on its own and thus direly needs foreign assistance. According to Economic Affairs Division, as of September 24, 2010 total multilateral and bilateral pledges worth $1.46 billion have been made of which $411.28 million are in the form of grant and $709 million in kind. However, only $53.38 million grant has been disbursed, while relief goods worth $285 million have been received. In addition, the World Bank and the Asian Development Bank will provide $1 billion and $500 million respectively in credit. The IMF's $451 million loan has already been mentioned... Floods have undone the economic recovery -- fragile though it was -- that began in the last financial year. The economic slowdown will result in loss of jobs and incomes as well as revenue. The level of domestic savings (10.1 per cent of GDP) and investment (16.6 per cent), which is already quite low, will further come down and reduce future growth prospects...
One of the planks of neo-liberal policies has been cutting public subsidies across the length and breadth of the economy, both to producers and consumers. While there is no disagreement that direct or indirect subsidies from government accruing to the rich and powerful represent a major social injustice, the facts bear witness that it has been the poor and defenseless who have primarily been at the receiving end of the anti-subsidy crusade. If there is any doubt about this we need only to cast our thoughts to our electricity bills which have doubled in recent months. And if the readers of newspapers such as this one are feeling the pinch, then one can imagine how a family of six earning Rs10,000 a month is coping with an electricity bill of Rs2000 (and often more)... Of course, a genuine programme of structural reform is exactly what is missing in most of these reports. The SBP report repeatedly notes the importance of broadening the tax net, but continues to eulogise the general services tax (GST) as the panacea to our problems. There is no mention of reviving the wealth tax, for example, which was of course abolished under the Shaukat Aziz regime even while liquid earnings of the rich and powerful were increasing exponentially. There is no mention of properly accounting for and then taxing the earnings of military-run enterprises (whether mills, colleges, real estate, etc. etc.). These are the big fish that need to be giving up a significant chunk of their incomes, while GST is simply pushed onto the consumer in the form of higher prices...
Fiscal deficit surpassed the 4.9 percent target to reach 6.3 percent of GDP despite drastic cuts in development spending as the Public Sector Development Programme (PSDP) was slashed from Rs646 billion budgetary allocation to Rs490 billion. Current expenditure surpassed the Rs2.26 trillion revised target to reach Rs2.40 trillion. Revenue receipts increased from Rs1.67 trillion to Rs2.05 trillion. However, as a percentage of GDP revenue fell to 14.2 percent from 14.5 percent a year earlier. Tax-GDP ratio also fell to 10 percent from 10.3 percent.
SBP has aptly mentioned that subsidies and losses of public sector enterprises increased by 10 percent compared to the previous fiscal year and "to put this in perspective, in Fiscal year 2009-10 these expenditures, as a percentage of GDP, were almost equal to the combined total budget for health and education". According to SBP, this was by no means "an acceptable situation"... It also added that recent 50 per cent hike in government sector salaries, anticipated rise in energy tariffs and removal of GST exemptions to broaden the tax base are also likely to exacerbate the already sky-rocketing prices. The SBP asserted that losses to agriculture, livestock and other sectors have limited prospects of GDP growth for FY11 to the range of "2 to 3 percent"... If the $98 billion in development assistance provided to Pakistan from 1960 to 2009 had been invested during this time to yield a moderate real return of 8 percent, it would have grown into assets equal to $619 billion in 2008, many times Pakistan’s current external debt. Instead, this debt now stands at over 70 percent of GDP, and is in and of itself a constraint on growth.
This is alarming. Some 1,233 persons have been killed in Karachi during the last 10 months. This was disclosed in a talk show by a private TV channel on October 21, 2010. To assure citizens about the government’s seriousness in putting an end to the killings, the interior minister lands in Karachi... he federal board of revenue collects some 53 percent of revenues from Karachi. About 30 percent of Pakistan’s manufacturing sector is located here and it generates some 20 percent of Pakistan’s GDP. This hub of commerce and industry now remains paralysed for many days every year... If we have a look at Karachi’s population, at 4-6 million Pashtuns constitute some 25 percent of the city’s population and around 15 percent population of the entire Sindh whereas Urdu-speaking mohajirs or MQM number around 7-9 million and thus account for some 45 percent of the residents of the metropolis and around 23 percent of the entire Sindh. Out of 168 seats in the Sindh Assembly, ANP has only 2, MQM 50, NPP 3, PML-F 8, PML-Q 11 and PPP 93.
The prices of the entire range of essential kitchen items have jumped up by 10 to 30 percent within last one week in the twin cities of Islamabad and Rawalpindi, according to a survey conducted by Business Recorder. Traders in Rawalpindi/Islamabad wholesale markets told Business Recorder that prices of most of the food items have risen subsequent to the increase in prices of petroleum products.
Briefing the media persons spokesperson to the President Farhatullah Babar said that the meeting was part of the interactive sessions the President has been regularly holding with private entrepreneurs in search of solution to the country's economic woes.Issues ranging from reconstruction of flood areas to inflation and from engaging private entrepreneurs in mega development project to raising equity from stock markets for infrastructure projects were discussed in the meeting, he said.
State Minister for Economic Affairs, Hina Rabbani Khar on Friday said that Pakistan needs $1.93 billion for the recovery and rehabilitation of flood-stricken people. She said this while addressing 'Launching of Pakistan's Floods Relief and Early Recovery Response Plan 2010' ceremony jointly organised by the United Nations (UN) and National Disaster Management Authority (NDMA) here on Friday.
The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Sultan Ahmed Chawla has urged the government not to borrow a single penny from the IMF, Word Bank or any other institution in future rather it should seek moratorium for five years to help country get out of loan trap. Pakistan is in critical situation now only due to mismanagement and imposition of one sided decisions and it has been shunting the economy to destabilisation. He said IMF package has only provided the poverty not prosperity.He also emphasised to privatise the Railways, Steel mills and PIA in the vested interest of Pakistan. It will accelerate the economy to boost up in well manner. He also suggested overcoming the crisis of electricity, the offers from China and Iran must be considered. But in the long term dams must be constructed at any cost.
There are three major conditions which the government has failed to comply with. Firstly, failure to begin implementation of the value-added tax, renamed as the Reformed General Sales Tax (RGST) by the incumbent Finance Minister Dr Hafeez Sheikh in an effort to dispel few domestic controversies over the proposal. Secondly, failure to effect reforms in the energy sector that include full cost recovery through elimination of subsidies not expected to be supported by the general public still smarting under the recent 9 percent escalation in prices of petroleum products, in line with the rise in the international market; and to reduce the subsidy on electricity by increasing the tariff by 2 percent every month until end June 2014. Thirdly, government excessive borrowings from the central bank due to delay in reimbursement of Coalition Support Fund. The implementation of both these policy options requires strong political will owing to fear of a political backlash... Economists no doubt would point out that compliance with these conditions must be viewed as a short-term measure and that the long-term measures must include a long standing demand of the public, that is now echoed by the international donor community: tax the elite across-the-board on the one hand, reduce corruption and budgetary support of the state-owned enterprises and stop government profligacy on the other. According to media reports, the visiting International Monetary Fund (IMF) team has criticised the government's slow progress in complying with two conditions of the November 2008 Stand-By Arrangement (SBA): implementation of the value added tax (reworded as the Reformed General Sales Tax by incumbent Finance Minister Dr Hafeez Sheikh) and power sector reforms that include the ending of all subsidies in an effort to move towards full cost recovery.
Prior to denigrating the IMF for interfering in our macroeconomic policy decision-making, three factors need to be acknowledged. First and foremost, it was the federal government that approached the IMF seeking the SBA; and if reports are accurate, it was the federal government that sought US mediation to convince the IMF to support Pakistan through the 7.3 billion dollar assistance in the first place. Second and related fact is that the economic havoc created by the PML (Q) government and the caretakers in 2007, in a blatant attempt to win over voters for the scheduled February 2008 elections, led them into taking decisions that were untenable from an economic perspective. These decisions included extending a hefty and unsustainable subsidy for petroleum products that seriously compromised the budget deficit, propelling inflation on the one hand and inter-circular debt on the other. Such unsavoury decisions compelled the PPP-led government to seek the SBA in the first place. And third, the IMF conditions that the government has yet to comply with are economically sound given certain assumptions. These include: (i) the refusal of the government to impose a tax on the elite that includes a tax on the income of rich landlords; (ii) the need to improve governance, which must include appointing heads of state-owned entities (SOEs) on merit rather than on the basis of nepotism. The fact that the ruling party has selected heads of SOEs on the basis of nepotism became evident in the National Insurance Company Limited, the Pakistan Steel Mills, OGDCL and the Pakistan International Airlines. Thus significant economies could have been affected if these companies had been headed by competent people who would have ended their heavy reliance on budgetary support; and (iii) reduce non-development expenditure... The latest reports reveal that the federal government would have to raise power tariffs by about 2 percent per month to be able to meet this target, an amount that is expected to have a very high political cost, especially with all the political parties, including those which are in coalition with the government, lamenting the fact that the PPP-led government did not take them into confidence while raising the price of petroleum products by about 9 percent this week.
The All Pakistan Textile Mills Association (Aptma) is going to hold a crucial meeting on energy crisis with the Federal government on Monday in a situation where gas supply to industry is already in doldrums ahead of winter season. The Aptma delegation, under the leadership of Chairman Gohar Ejaz, will call on Federal Minister for Textile Farooq Saeed and Federal Minister for Petroleum Naveed Qamar... He said a hurried landing of Federal Petroleum Minister in Lahore during last week had also failed to develop tangible improvement. According to him, the judicious economic contribution of textile industry was far ahead of the fertiliser industry and the CNG pumps, as 15 million direct and indirect workforce is attached to the textile throughout the country.
The government will sign an agreement with American based seed producing company Monsanto by the end of December, 2010, Business Recorder has learnt. The Ministry for Food and Agriculture (MinFa) and the American seed company Monsanto had singed a Memorandum of Understanding (MoU) on April 10, 2010 for providing Bt Cottonseed to Pakistan.
He admitted that the PPP government after coming into power took some unpopular decisions in the larger interest of the country like withdrawing subsidies on utilities to save national economy from crisis. He said that the increase in prices of petroleum products was necessary to avoid deficit of Rs 100 billion.
The Friends of Democratic Pakistan (FoDP) forum has issued a warning to the Government of Pakistan (GoP), saying that its energy crisis would become unmanageable by 2015-16 if it failed to introduce a 5-point recovery plan for immediate overhauling of its entire power infrastructure. The 5-point plan stresses urgent need to rationalise electricity prices and do away with subsidies. Other salient features of the plan are strengthening energy sector governance and regulation, developing energy finance capability, maintain energy efficiency into energy policy and fast track investment projects for energy security. The FoDP noted during the deliberations on a strategy to help Pakistan overcome its energy crisis that Pakistan's energy crisis was worsening fast as its present energy gap of 18 million metric tons of oil (MTEO) will grow to unmanageable 56 MTEO by 2015-16 and simultaneously energy import requirements will increase from $10 billion to $38 billion.
However, Secretary Finance, Salman Siddique claimed that good progress had been made during the policy-level talks with the IMF, saying that "I think we are almost there. We focus more on getting the things out of the way and a meeting of provinces has been convened on Monday to evolve consensus on RGST". Salman said good progress was also made towards budgetary framework. "We will try to place RGST before the current session of the Parliament and there would be a signing off with the World Bank and Asian Development Bank (ADB) of reformed plan of energy sector prepared by Deputy Chairman Planning Commission," he said. Replying to a question, he said that Pakistan had received $8.6 billion from the $11.3 billion total augmented SBA. He evaded a question that how the 4.7 percent fiscal deficit for the current fiscal year allowed by the IMF would be achieved. According to him, the tax target for the outgoing fiscal year will be Rs 1,650 to Rs 1,655 billion.
Major businesses including petroleum, textile chemical and other zero-rated sectors are facing serious liquidity problems as the Federal Board of Revenue is reluctant to issue SOP for processing their billions of rupees sales tax refunds, manually, Business Recorder learnt on Thursday.
Federal Public Sector Development Programme (PSDP) has been slashed to Rs150 billion from Rs 280 billion. Both sides have also agreed to cut the provincial annual development programmes by 50 percent... The foreign inflows for budgetary support would fetch only around 0.6 percent of GDP as creditors were not ready to extend money directly to the government owing to lack of confidence in the leadership, said official sources who did not want to be identified. The government would have to arrange most of the financing from domestic sources, they said. Pakistani authorities informed the IMF staff that Sukuk bonds would be issued in the domestic market to raise Rs80 billion in the current fiscal year.
Foreign inflows and developments on an important loan tranche for the country are likely to drive the Karachi share market next week, dealers said. “Foreigners’ interest in the market is expected to offer significant support,” said Saeed Khalid, an analyst at Invest Capital. He said any positive news regarding the fifth tranche from International Monetary Fund (IMF) and other disbursements by International Finance Institutions (IFIs) would also pump up activity in the market. Investors were encouraged by the breakthrough reached in the talks between the IMF and the Pakistani officials, who agreed on revising fiscal deficit target to 4.7 percent, eliminating the circular debt, public listing of power companies and presentation of a new sales tax bill in the Parliament’s current session, dealers said. This offered some hope with respect to the release of the fifth tranche under the Standby Arrangement, they added.
Consumer loans fell 17 percent in financial year 2009-10 as the public income remained hostage at the hands of raging inflation, the central bank said in a recent report.
Though default rose 33 percent in 2009-10 mainly on the back of mortgage and personal loans, it is unlikely to grow further, or at least not with the same rate, amid shrinking consumer credit, analysts said. “Our economy is scantly leveraged and banks have a customer of choice in shape of the government,” said Khurram Shehzad, Analyst at Investcap Securities. “They are taking the easiest way of pumping money to the government.” The government breached IMF quarterly ceilings on borrowing from the banks during first half of the current year. It provides banks a risk-free investment avenue to avoid riskier options, such as consumer loans. “The State Bank needs to wean them off. They (banks) are supposed to channelise funds to the whole economy,” Shehzad said... In a country where only three million people use banks, barely one percent resort to mortgage unlike other developing or developed countries where the rate is much higher.
In a meeting with bed linen exporters, the former minister, Humayun Akhtar Khan, said the interest rates have been cut globally to encourage businesses while in Pakistan, the situation is exactly otherwise. “The economy is sustaining on the IMF loans and the government is blindly following its dictations,” he said. Akhtar said that the foreign direct investment (FDI) must be channelised into export-based industries, not just in telecom and power sectors, to strengthen the economy.
Although tobacco cultivation occupies a relatively small area of 0.27 per cent of the total irrigated land in the country and about 3 per cent in Khyber Pakhtunkhwa, it is a chief source of revenue, employment and foreign exchange earnings to the economy. Being a highly labour-intensive crop, about 80 thousand persons are involved in its cultivation, fifty thousand are engaged in cigarette factories of the tobacco industry and another one million find indirect employment through its trading.
Experts also highlighted that reconstruction activity in flood-ravaged areas has so far been slow and limited. They say that so far there has not been any significant increase in demand for cement and other construction materials due to reconstruction efforts.
Drive down towards Taunsa barrage on the Indus River and you might see something peculiar. On the right hand, behind the bund connecting to Taunsa Barrage are acres upon acres of lush farms growing cotton and sugarcane. According to select irrigation officials, the MPA, Sabit Nazim and eyewitnesses living in the area, these areas (ponds) are government land, previously part of the old river bed, and serve as ponds where water can be redirected in case of excessively high water levels during floods. It is also an area with almost no or negligible settlement. On the other hand, the left bank of the river, where the breach took place, is populated. The ponds on the right side, where the eye needs to look far and wide to see human life, are empty of water. No one can confirm who these lands belong to or why they are dry while the left side is flooded. But whisperings of powerful interests that wanted to protect their lands thrive, and the hope is that the tribunal can help prove, or disprove, that this was the case.
Everything was working fine for Faheemullah, 25, a miner from Peer Sabak village of Nowshera district in Khyber Pakhtunkhwa till August 2; the day flood hit his area. "I was earning Rs300 after working 12 hours a day in the mountains which was enough money to support my family. Since floods have hit our area everything has finished for me. I have lost my home as well as job. I am ready to work to earn money for my family but the contractors have disappeared as the communication infrastructure has wiped out and there is no way to get marble and precious stones out of mountains", he says, adding, "more than 1500 miners were working only in Nowshera. All of them have lost their jobs after the floods. I have contacted my contractor and he has told me that it would take at least six moths to start mining work in the mountains" he says... International Labour Organisation (ILO) has estimated that more than 5.3 million jobs may have lost or affected as a result of mega floods hit Pakistan.
The existing tax system protects exploitative elements having monopoly over economic resources. The poor are paying an exorbitant sales tax of 17pc to 23pc (in fact 40pc on finished imported goods after customs duty, special federal excise duty, sales tax after mandatory value addition and income tax at source) on essential commodities. But the mighty sections of society such as absentee landlords, big industrialists, generals and bureaucrats are paying no wealth tax/income tax on their colossal assets/incomes. It is tragic that in a country where the rich make billions on a daily basis, tax-to-GDP ratio is pathetically low at 9.8pc... There is an urgent need to tax wealth and income of the rich and mighty. Rent of agriculture land derived by absentee landlord should be taxed so heavily that they are forced to give up ownership -- these lands should be with the tillers who produce agriculture produces. The corporate rate should be brought down to 20pc to promote industrialisation, but any director or other office holder (having more than 20pc shares) drawing annual salary exceeding Rs5 million should be taxed at the rate of 50pc... The government should launch programmes, financed mainly through taxes, to solve the twin problems of unemployment and poverty. These welfare-oriented schemes may also include subsidised/free medical and educational facilities, low-cost housing, and drinking water facilities in rural areas (especially flood-ravaged ones), land improvement schemes, and employment guarantee programmes. Once people see tangible benefits of the taxes paid, there will be better response to tax compliance. Taxes cannot be collected through harsh measures and irrational policies. It is high time politicians, judges, civil-military high-ups and public office holders made public their tax declarations.
On November 25, 2008, the International Monetary Fund (IMF) approved the $7.6 billion standby arrangement for Pakistan to be delivered over 23-month, which was later enhanced to $11.3 billion in July 2009. One of the demands of the lender was introduction of Value Added Tax (VAT) from July 1, 2010. It was deferred to October 1, 2010 and now IMF has suspended release of the last tranche unless it is implemented as FBR failed to introduce RGST after lapse of the deadline fixed by the government in the budget speech of Finance Minister... There is no political will to tax the rich and mighty. They have not pointed this out in their recommendations (sic). Instead of more taxes we need reduction in excessive marginal tax rates making them compatible with other tax jurisdictions of the world, especially Asia. Elimination of GST on production, machinery and equipment is the need of the hour to promote industrialisation, but they have advised otherwise. The current external debt of Pakistan stands at $ 55 billion. That figure will jump to $73 billion in 2015-16, as debts that were rescheduled after 9/11, in exchange for Pakistan's co-operation in the war on terror, will come back into action. Besides this, Pakistan is paying over $ 3 billion on debt servicing every year on average. As for the FY 2010, this amount is $ 5. 640 billion, which Pakistan will be paying to its creditors amid 20 million people crying for most urgent basic needs; food, clothes, shelter, health and education... Pakistan's debt repayments already amount to three times what the government spends on healthcare -- in a country where 38 percent of under 5-year-olds are underweight, only 54 percent of people are literate, and 60 percent live below the poverty line... Thus, under the present circumstances, it is almost impossible for the government of Pakistan to meet basic requirements of its millions of displaced people as the international response to Pakistan is far less than the Tsunami and Haiti disasters -- the world community has only provided $229 million to Pakistan so far. This translates into $16.16 for each affected Pakistani person as compared to $1,087 every affected person in Haiti and $1,249 per affected person in the Indian Ocean tsunami.
All these three parties are not only coalition partners in the Sindh provincial government but are also partners in the federal government. The coalition governments have been marred by mutual distrust and an increasing observable unease, sometimes volatile, when it comes to the identification of those accused of murders and arson as well as the dispersal of government jobs. The leaders of triangular political forces of Karachi -- PPP, ANP and the MQM -- on a number of occasions went an extra mile to keep tensions in check, but the provincial leaders and workers of the coalition partners are far from any conciliation mood. The third emerging ethnic force in Karachi, the NAP was able to extract two provincial assembly seats in Karachi, much to the dismay of the MQM, on the basis of growing Pashtun population in the city. The Guardian, while reporting Imran Farooq's murder, pointed towards the MQM's "longstanding rivalries with ethnic Pashtun and Sindhi parties in Karachi," and added that "the MQM has also been riven by occasional internecine violence".
The deposit holders get negligible returns on their savings, while the banks are earning mark-up between 12 to 18 percent from borrowers -- this is the worst kind of exploitation one can think of. Even the governments -- federal and provincials -- borrow funds at exorbitant rate of nearly 14 percent from private banks. Nowhere in the world such a wide spread of earning is available to banks -- adding insult to injury they call it profit and loss sharing. One wonders what the regulator, State Bank of Pakistan (SBP), is doing... The State Bank of Pakistan, during a suo motu case before the apex court has admitted that financial institutions wrote off Rs256 billion loans from 1971 to 2009. During the self-acclaimed transparent era of Musharraf-Shaukat, loan write-offs in just seven years (2000-2006) crossed the figure of Rs125 billion, whereas in the much-publicised corrupt eras of elected governments (1985-1999) it was just Rs30 billion. This comparison speaks for itself and does not require any further comments... The new owners made billions as banks were sold at discounted prices and money realised from so-called privatisation was not used for external debt retirement but for the benefits of rulers. In the entire process, the country lost billions of rupees. The nation also suffered revenue losses of Rs120 billion as bad debts written off by the banks under the SBP's amnesty scheme enjoyed tax exemption. In 1990, the Auditor General of Pakistan issued a detailed audit report questioning the authority of Board of Revenue to issue administrative instructions for allowing bad debts. It is quite understandable how the Board of Revenue and SBP, in the presence of this audit report issued further concessions to the borrowers and banks.
The small pack of chocolate on sale cost Rs20 and the bigger one Rs30. Hazrat Bilal said he and his father bought the smaller pack from the IDPs for Rs11 or 12 and made profit of eight to nine rupees on each pack. It was strange to find out that the foreign donors had sent chocolates instead of something useful for the IDPs, who thought they couldn't afford the luxury and would be better-off selling it to make some money and use it to buy items of essential use. Another interesting observation was that Hazrat Bilal and most other sellers of relief goods were Afghan refugees. They were buying these goods from Pakistani IDPs and then selling to needy Pakistanis. Having been involved in the business of selling and buying relief goods for years, the Afghan refugees are able to do a better job in earning their livelihood in this manner. This was evident from the initially poor response to the UN Appeal for emergency international assistance for the IDPs. The UN appealed for $ 543 million to cover the cost of looking after the needs of 1.5 million IDPs for the six-month period ending December 2009. Until the end of May, it had received $ 88 million only constituting 16 per cent of the appeal. Though the response to the appeal for donations improved subsequently, the needs too kept rising with the displacement of more people and extension of the zone of conflict to new fronts in tribal areas such as South Waziristan, Orakzai and Kurram.
The economy, according to the IMF, was picking up before the floods hit the country. The real GDP grew by 4.1 percent, the current account deficit narrowed to $3.5 billion (2 per cent of GDP) and both exports ($19.63 billion) and remittances ($8.90 billion) went up during the last financial year (FY10). However, the budget deficit surpassed the 5.1 percent revised target to reach 6.3 per cent of GDP... On the basis of data provided by the Pakistan government, the IMF has predicted that during the current fiscal year, real GDP growth will come down to 2.8 percent ($190.20 billion) from the pre-floods estimates of 4.3 percent ($190.66 billion); the current account deficit will increase to 3.1 percent ($5.86 billion), 0.6 percentage points higher than the pre floods estimates of 2.5 percent ($4.62 billion); inflation will rise to 13.5 percent from 11.7 percent estimates before the deluge; exports and imports will grew by 3 percent and 8.7 percent respectively compared with earlier estimates of 4.7 and 6.9 percent resulting into trade deficit of $13.52 billion... The devastation wrought by the floods is so enormous that the Pakistan government cannot cope with it on its own and thus direly needs foreign assistance. According to Economic Affairs Division, as of September 24, 2010 total multilateral and bilateral pledges worth $1.46 billion have been made of which $411.28 million are in the form of grant and $709 million in kind. However, only $53.38 million grant has been disbursed, while relief goods worth $285 million have been received. In addition, the World Bank and the Asian Development Bank will provide $1 billion and $500 million respectively in credit. The IMF's $451 million loan has already been mentioned... Floods have undone the economic recovery -- fragile though it was -- that began in the last financial year. The economic slowdown will result in loss of jobs and incomes as well as revenue. The level of domestic savings (10.1 per cent of GDP) and investment (16.6 per cent), which is already quite low, will further come down and reduce future growth prospects...
One of the planks of neo-liberal policies has been cutting public subsidies across the length and breadth of the economy, both to producers and consumers. While there is no disagreement that direct or indirect subsidies from government accruing to the rich and powerful represent a major social injustice, the facts bear witness that it has been the poor and defenseless who have primarily been at the receiving end of the anti-subsidy crusade. If there is any doubt about this we need only to cast our thoughts to our electricity bills which have doubled in recent months. And if the readers of newspapers such as this one are feeling the pinch, then one can imagine how a family of six earning Rs10,000 a month is coping with an electricity bill of Rs2000 (and often more)... Of course, a genuine programme of structural reform is exactly what is missing in most of these reports. The SBP report repeatedly notes the importance of broadening the tax net, but continues to eulogise the general services tax (GST) as the panacea to our problems. There is no mention of reviving the wealth tax, for example, which was of course abolished under the Shaukat Aziz regime even while liquid earnings of the rich and powerful were increasing exponentially. There is no mention of properly accounting for and then taxing the earnings of military-run enterprises (whether mills, colleges, real estate, etc. etc.). These are the big fish that need to be giving up a significant chunk of their incomes, while GST is simply pushed onto the consumer in the form of higher prices...
Fiscal deficit surpassed the 4.9 percent target to reach 6.3 percent of GDP despite drastic cuts in development spending as the Public Sector Development Programme (PSDP) was slashed from Rs646 billion budgetary allocation to Rs490 billion. Current expenditure surpassed the Rs2.26 trillion revised target to reach Rs2.40 trillion. Revenue receipts increased from Rs1.67 trillion to Rs2.05 trillion. However, as a percentage of GDP revenue fell to 14.2 percent from 14.5 percent a year earlier. Tax-GDP ratio also fell to 10 percent from 10.3 percent.
SBP has aptly mentioned that subsidies and losses of public sector enterprises increased by 10 percent compared to the previous fiscal year and "to put this in perspective, in Fiscal year 2009-10 these expenditures, as a percentage of GDP, were almost equal to the combined total budget for health and education". According to SBP, this was by no means "an acceptable situation"... It also added that recent 50 per cent hike in government sector salaries, anticipated rise in energy tariffs and removal of GST exemptions to broaden the tax base are also likely to exacerbate the already sky-rocketing prices. The SBP asserted that losses to agriculture, livestock and other sectors have limited prospects of GDP growth for FY11 to the range of "2 to 3 percent"... If the $98 billion in development assistance provided to Pakistan from 1960 to 2009 had been invested during this time to yield a moderate real return of 8 percent, it would have grown into assets equal to $619 billion in 2008, many times Pakistan’s current external debt. Instead, this debt now stands at over 70 percent of GDP, and is in and of itself a constraint on growth.
This is alarming. Some 1,233 persons have been killed in Karachi during the last 10 months. This was disclosed in a talk show by a private TV channel on October 21, 2010. To assure citizens about the government’s seriousness in putting an end to the killings, the interior minister lands in Karachi... he federal board of revenue collects some 53 percent of revenues from Karachi. About 30 percent of Pakistan’s manufacturing sector is located here and it generates some 20 percent of Pakistan’s GDP. This hub of commerce and industry now remains paralysed for many days every year... If we have a look at Karachi’s population, at 4-6 million Pashtuns constitute some 25 percent of the city’s population and around 15 percent population of the entire Sindh whereas Urdu-speaking mohajirs or MQM number around 7-9 million and thus account for some 45 percent of the residents of the metropolis and around 23 percent of the entire Sindh. Out of 168 seats in the Sindh Assembly, ANP has only 2, MQM 50, NPP 3, PML-F 8, PML-Q 11 and PPP 93.
Saturday, September 25, 2010
The government budgetary borrowings from the central bank – reported to have shot up to just below Rs170 billion at the start of this month – to finance its budget are a major contributor to the surge in inflationary pressures in the economy because these contribute to growth of reserve money, which rose by 4.25 per cent year-on-year until September 3 from three per cent a year earlier.
Banks provide farm loans to about 1.4 million growers or one fifth of an estimated seven million potential borrowers. “Most of small and medium-sized growers have no access to agricultural loans and they borrow from informal sources,” said the head of an agricultural credit of a large local bank. Farmers estimate cumulative annual demand for crop and agricultural development loans at Rs2000 billion whereas banks’ lending remains below Rs300 billion. “Filling in this gap is a long-term policy issue... The federal government has set a target of 25 million tonnes wheat production this year and officials say that plans for free distribution of wheat and gram seeds are on the cards.
Cotton crop takes at lest 60 days to mature after the application of fertiliser. That means the crop would mature in the second week of November – the most propitious time for wheat sowing. Its picking would take another 10 to 15 days, and then soil preparation for wheat another week or so. The sowing might thus be delayed till mid- and even late-December, which, by no means, is desirable: after November 20, each day costs the farmer about 10 kilograms in yield. The factors forcing Punjab to save cotton as much as it can are truly compelling. The loss of every million bales deprives the rural economy of around Rs32 billion, increasing poverty correspondingly. It forces the textile industry to import the same quantity at the cost of very precious foreign exchange. Since 60 per cent of exports depend on cotton, it is wise to save it to the last boll. But, the provincial government also needs to ensure that food safety is not compromised next year. The huge carry-over stocks (about six million tons at present) do provide it huge space for manoeuvering. But it maintained the stocks at a massive cost – around Rs2.5 billion in per month interest payments to banks on a loan of over Rs200 billion. The ambitious package would cost the provincial government around Rs10 billion – an amount that it neither has nor can generate from its own sources.The province was able to grow around 18 million tons of wheat only when the Punjab government launched one billion rupees wheat maximisation programme, and literally focused all its financial, human and infrastructural resources on it. For the last two years, it has not only abolished the plan, but also was “relatively ignoring” the crop because of huge stocks that it could not clear from the 2007-08 yield. It reduced production last year by at least two million tons.
Most of the inundated farmlands are much below the level of Indus bank and the floodwater is facing difficulty in receding into the river. It will take months for the agriculture lands to become ready for cultivation. According to reports, on an average 4-5 feet water is still standing in the farmlands, spread over a large area. No effort is being made by the irrigation department for draining out the floodwater from farm fields. Lack of machinery, manpower, and finances have been underlined as major causes for it. Agriculture lands in Shikarpur, Jacobabad, Kashmore, Larkana, Shahdadkot, Thatta and parts of Dadu districts have been hit by the deluge. I don’t see any chance of the Rabi crops being planted this year, at least in these districts,” Secretary Agriculture Sindh Agha Jan Akhtar said.
The KP uses about 1.9 million acres for wheat cultivation. The provincial seeds industry provides 10 per cent of the total wheat seeds requirement of 80,000 metric tons to farmers.
This year the demand for wheat seed has increased. In the past, 70 per cent of the KP farmers used their own stock while the rest bought seeds. Now as floods have destroyed wheat stocks in Charasadda, Nowshera and the DIK and Lakki Marwat, the government will have to provide seeds to more farmers.
The yards had handled 86 ships with 778,598 light tonnage displacement (LDT) during the 2008-09 fiscal and the number rose to 107 ships having 852,022 LDT during 2009-10, giving something to cheer for the ship-breakers who had been under severe strain in preceding years.
Last year, wheat was cultivated on 2.7 million acres because of an attractive support price of Rs950 per 40kg. Growers in Jacobabad, Kashmore, Qambar-Shahdadkot, Larkana districts, who used to produce gram, got interested in growing wheat. Even katcha area has been producing wheat, sugarcane, cotton and paddy. Sindh Chamber of Agriculture president Dr Nadeem Qamar is hopeful about wheat cultivation on the left bank, provided irrigation department officials work effectively to provide water on time. He, however, sees no chances of Rabi crop on Indus right bank area. “The area is completely devastated by floods. I see no future for Rabi crop for our right bank counterparts,” he said.
The International Labour Organisation estimates that 5.3 million jobs may have been lost or affected by devastations caused by the floods. It emphasises that labour-intensive job creation programmes are urgently needed to lift millions of people out of poverty. The ILO has also offered to assist families and communities in rehabilitation and rebuilding.
The FBR’s high-ups want complete monopoly over tax collection—sharing it with provinces will deprive them of unlimited powers and speed money. They insist on uniform reformed GST implementation with one collecting authority at federal level “to avoid complications”. They want it not for avoiding any complications but for self-aggrandisement.
The impact of the downturn, however, has not been even. While Lahore and Karachi have seen vacancy rates hover between 40 and 50 per cent during the year 2010, Islamabad has seen vacancies reach only 10 per cent, largely due to a higher incidence of recession-proof government clients. Property values have fallen across Islamabad and Karachi but not Lahore. Most observers, including those at BMI have been unable to explain the phenomenon.
The government’s domestic net financing needs will increase after the floods and about Rs2 trillion ($23.28 billion) in treasury bills will need to be rolled over this fiscal year, the IMF said, while private demand will soften and undermine the already weak recovery in private sector growth. “The SBP (State Bank of Pakistan) is facing a difficult balancing act,” the IMF said.
Fauji Cement’s profit plummeted 75 per cent to Rs250 million for fiscal year 2010 compared with last year’s Rs1 billion. “The company’s fall in net profit was mainly due to a three per cent decline in cement dispatches and 26 per cent lower selling prices year-on-year,” said senior research analyst Sana Abdullah at IGI Securities.The complete sector has felt the heat as giants Lucky Cement and DG Khan Cement reported a fall in profits by 31 and 55 per cent, respectively, during the same period.
The country has been supported by the overseas Pakistanis who sent record amount of $8.9 billion last year and remitted record amount during July-August of the current year. The country received $933 million in August and $1.724 billion during July-August which was 13 per cent higher than last year.
When asked why was the government not asking international lending institutions to write off their loans, Ms Khar claimed it was not an easy decision because of its long-term repercussions. She said the move would make the country a pariah state.
National Assembly was informed Thursday that PSDP may be cut by 30% to 50% in view of recent floods to divert resources for rehabilitation and reconstruction of affected areas.
A few years ago a man committed suicide in Karachi after being hounded by a recovery team for defaulting on a Rs250,000 loan. The ensuing outrage caused the SBP to caution banks from employing hostile tactics when recovering loans. It is a sad reflection on society when defaulters of small loans are hunted down, while the multi-million rupee loans of the well-connected are written off.
Consumers have yet to see any respite in prices of essential items after Eid as rates of some items, especially vegetables have climbed to an all time high. The government, which is now more engaged in post-flood situation, besides striving hard to save the current setup, has not taken any serious measures to contain food inflation. For instance, the wholesale rate of sugar, after reaching the peak of Rs78 per kg ahead of Eid, has now come down to Rs76.50 per kg...
A report in this newspaper yesterday suggests the defence budget has been quietly hiked by an astonishing 25 per cent, from the budgeted figure of Rs442bn to over Rs550bn. As usual, neither the government nor the military has seen fit to divulge any details, making it difficult to comment on the need for such an extraordinary increase. A few comparisons may put the figure of Rs110bn in the proper perspective. Rs110bn is close to half the amount public-sector enterprises rack up in losses each year — a key area of reform and restructuring that the international financial institutions have been emphasising. Rs110bn exceeds the entire gains that the reformed General Sales Tax is expected to make. The sum is also roughly equal to the amount which would be raised by the controversial ‘flood tax’ that has been mooted. One single head of expenditure, then, is already set to absorb all the revenue gains that are expected to be made this year — even before those gains are realised. Surely, the public is owed an explanation.
The share of tax revenues distributed to provinces rose significantly in 2010-11 under NFC and since spending responsibilities have not yet been transferred, the federal budget expected provinces to save most of the additional funds and run surpluses this fiscal year.
Nevertheless, subsidy needs for the electricity sector are to be determined and will likely to exceed the Rs30 billion or 0.2 per cent of GDP, provided in the budget. The report also showed concern that new ‘circular debt’ in the energy sector continues to accumulate. . Initial estimates from the State Bank put loan losses related to floods at about Rs54 billion, of which Rs34 billion are loans to agriculture.Although significant, this is unlikely to materially affect the banking system as total private sector loans amount to close Rs3 trillion.
Services sector posted a deficit of $567 million in July-August of current fiscal year as compared to $481 million in corresponding period of last fiscal year, depicting an increase of 17.87 percent or $86 million. Export of Services trade mounted by 5 percent or $27 million to $589 million in first two months of current fiscal year relative to $562 million in same period of last fiscal year. Similarly, imports under services sector registered an increase of 11 percent due to high payments on account of transportation, travel services, insurance, technical fee, royalties and government sector. Services sector imports stood at $1.156 billion in July-August of fiscal year 2010-11 as compared to $1.043 billion in corresponding period of fiscal year 2009-10, depicting an increase of $113 million.
The foreign investors have repatriated over 100 million dollars abroad on account of profit and dividend, despite slackness in the Pakistan's economy and global economic recession. However, repatriated amount during the first two months of the current fiscal year is some 3.4 percent lower than the repatriation in the same period of the last fiscal year 2010.The central bank on Friday revealed that country has attracted 171.4 million dollars foreign direct investment (FDI) in July-August of current fiscal year related to 344.5 million dollars in the same period of fiscal year 2010. Foreign investors have repatriated 85.7 million dollars on account of return on FDI in the first two months of the current fiscal year over the 90.8 million dollars in the same period of the last fiscal year, depicting a decline of 14 percent. While, during the period return on foreign private investment has posted an increase of 12 percent or 1.6 million dollars to 15.2 million dollars from 13.2 million dollars. Only 8 sectors out of some 36 sectors, showed increase in the repatriation of profit, while remaining all sectors depicting downward trend. Beverages, Textile, Fertiliser and personal services are leading sector, where from not a penny has sent abroad by the foreign investors. The major repatriation has registered from the power sector, where from foreign investors has repatriated 47 million dollars in July-August of fiscal year 2010-2011 over the repatriation of 34 million dollars in corresponding period of the last fiscal year, depicting an increase of 38 percent. It may be mentioned here that the government of Pakistan has allowed a 100 percent repatriation of profit to the foreign investors. Therefore, foreign investors are fully enjoying the government's policy by transferring their profit back since 2004.
Mohsin said the country could take a full advantage of the present energy limitations in Bangladesh and serious wage hike in China, as few international buyers have started turning faces to Pakistan, now. "Pakistan should reap the full benefit of this situation and increase exports to improve trade deficit," he urged the government. With a firm belief, he said advantage of VAT imposition was almost negligible as compared to huge export loss. He urged the government to revisit its decision on VAT imposition to save the export industry from a possible collapse.
Despite a short fall of about 1.5 million tons in rice production due to devastating floods, Pakistan will be able to export rice worth $2 billion during FY 2010-2011. Former Chairman Rice Exporters Association of Pakistan (Reap) and a prominent rice exporter, Azhar Akhtar, told Business Recorder on Saturday that Pakistan has about 0.8 million tons of milled rice worth $800 millions as a carryover of the previous crop. He said the demand of Pakistan's superior quality basmati rice is picking up in the international market at a rate of $1050 to $1100 per ton. Akhtar said though the unprecedented floods have damaged rice over 7,08,000 hectares area out of the total of 2.64 million hectors, especially in Sindh, yet Pakistan is likely to produce about 5 millions tons of basmati and other rice varieties this season against the target of 6 million tons of rice. The country consumes about 2.2 million tons annually and exports the surplus quantity of rice.
The Inter-national Monetary Fund (IMF) has observed that the government of Pakistan is spending $2 billion a year on subsidising power, and urged it to reform the power sector so that support is directed at the poor and the needy, and not in an untargeted fashion.
The 10 percent income tax surcharge is estimated to generate additional revenue of around Rs 55 billion. According to sources, it is expected that the government may issue ordinance for imposition of 1.5 percent flood disaster duty on non-essential imports. The duty is estimated to generate additional revenue of Rs 11 billion for the flood affected population of the country.
Banks provide farm loans to about 1.4 million growers or one fifth of an estimated seven million potential borrowers. “Most of small and medium-sized growers have no access to agricultural loans and they borrow from informal sources,” said the head of an agricultural credit of a large local bank. Farmers estimate cumulative annual demand for crop and agricultural development loans at Rs2000 billion whereas banks’ lending remains below Rs300 billion. “Filling in this gap is a long-term policy issue... The federal government has set a target of 25 million tonnes wheat production this year and officials say that plans for free distribution of wheat and gram seeds are on the cards.
Cotton crop takes at lest 60 days to mature after the application of fertiliser. That means the crop would mature in the second week of November – the most propitious time for wheat sowing. Its picking would take another 10 to 15 days, and then soil preparation for wheat another week or so. The sowing might thus be delayed till mid- and even late-December, which, by no means, is desirable: after November 20, each day costs the farmer about 10 kilograms in yield. The factors forcing Punjab to save cotton as much as it can are truly compelling. The loss of every million bales deprives the rural economy of around Rs32 billion, increasing poverty correspondingly. It forces the textile industry to import the same quantity at the cost of very precious foreign exchange. Since 60 per cent of exports depend on cotton, it is wise to save it to the last boll. But, the provincial government also needs to ensure that food safety is not compromised next year. The huge carry-over stocks (about six million tons at present) do provide it huge space for manoeuvering. But it maintained the stocks at a massive cost – around Rs2.5 billion in per month interest payments to banks on a loan of over Rs200 billion. The ambitious package would cost the provincial government around Rs10 billion – an amount that it neither has nor can generate from its own sources.The province was able to grow around 18 million tons of wheat only when the Punjab government launched one billion rupees wheat maximisation programme, and literally focused all its financial, human and infrastructural resources on it. For the last two years, it has not only abolished the plan, but also was “relatively ignoring” the crop because of huge stocks that it could not clear from the 2007-08 yield. It reduced production last year by at least two million tons.
Most of the inundated farmlands are much below the level of Indus bank and the floodwater is facing difficulty in receding into the river. It will take months for the agriculture lands to become ready for cultivation. According to reports, on an average 4-5 feet water is still standing in the farmlands, spread over a large area. No effort is being made by the irrigation department for draining out the floodwater from farm fields. Lack of machinery, manpower, and finances have been underlined as major causes for it. Agriculture lands in Shikarpur, Jacobabad, Kashmore, Larkana, Shahdadkot, Thatta and parts of Dadu districts have been hit by the deluge. I don’t see any chance of the Rabi crops being planted this year, at least in these districts,” Secretary Agriculture Sindh Agha Jan Akhtar said.
The KP uses about 1.9 million acres for wheat cultivation. The provincial seeds industry provides 10 per cent of the total wheat seeds requirement of 80,000 metric tons to farmers.
This year the demand for wheat seed has increased. In the past, 70 per cent of the KP farmers used their own stock while the rest bought seeds. Now as floods have destroyed wheat stocks in Charasadda, Nowshera and the DIK and Lakki Marwat, the government will have to provide seeds to more farmers.
The yards had handled 86 ships with 778,598 light tonnage displacement (LDT) during the 2008-09 fiscal and the number rose to 107 ships having 852,022 LDT during 2009-10, giving something to cheer for the ship-breakers who had been under severe strain in preceding years.
Last year, wheat was cultivated on 2.7 million acres because of an attractive support price of Rs950 per 40kg. Growers in Jacobabad, Kashmore, Qambar-Shahdadkot, Larkana districts, who used to produce gram, got interested in growing wheat. Even katcha area has been producing wheat, sugarcane, cotton and paddy. Sindh Chamber of Agriculture president Dr Nadeem Qamar is hopeful about wheat cultivation on the left bank, provided irrigation department officials work effectively to provide water on time. He, however, sees no chances of Rabi crop on Indus right bank area. “The area is completely devastated by floods. I see no future for Rabi crop for our right bank counterparts,” he said.
The International Labour Organisation estimates that 5.3 million jobs may have been lost or affected by devastations caused by the floods. It emphasises that labour-intensive job creation programmes are urgently needed to lift millions of people out of poverty. The ILO has also offered to assist families and communities in rehabilitation and rebuilding.
The FBR’s high-ups want complete monopoly over tax collection—sharing it with provinces will deprive them of unlimited powers and speed money. They insist on uniform reformed GST implementation with one collecting authority at federal level “to avoid complications”. They want it not for avoiding any complications but for self-aggrandisement.
The impact of the downturn, however, has not been even. While Lahore and Karachi have seen vacancy rates hover between 40 and 50 per cent during the year 2010, Islamabad has seen vacancies reach only 10 per cent, largely due to a higher incidence of recession-proof government clients. Property values have fallen across Islamabad and Karachi but not Lahore. Most observers, including those at BMI have been unable to explain the phenomenon.
The government’s domestic net financing needs will increase after the floods and about Rs2 trillion ($23.28 billion) in treasury bills will need to be rolled over this fiscal year, the IMF said, while private demand will soften and undermine the already weak recovery in private sector growth. “The SBP (State Bank of Pakistan) is facing a difficult balancing act,” the IMF said.
Fauji Cement’s profit plummeted 75 per cent to Rs250 million for fiscal year 2010 compared with last year’s Rs1 billion. “The company’s fall in net profit was mainly due to a three per cent decline in cement dispatches and 26 per cent lower selling prices year-on-year,” said senior research analyst Sana Abdullah at IGI Securities.The complete sector has felt the heat as giants Lucky Cement and DG Khan Cement reported a fall in profits by 31 and 55 per cent, respectively, during the same period.
The country has been supported by the overseas Pakistanis who sent record amount of $8.9 billion last year and remitted record amount during July-August of the current year. The country received $933 million in August and $1.724 billion during July-August which was 13 per cent higher than last year.
When asked why was the government not asking international lending institutions to write off their loans, Ms Khar claimed it was not an easy decision because of its long-term repercussions. She said the move would make the country a pariah state.
National Assembly was informed Thursday that PSDP may be cut by 30% to 50% in view of recent floods to divert resources for rehabilitation and reconstruction of affected areas.
A few years ago a man committed suicide in Karachi after being hounded by a recovery team for defaulting on a Rs250,000 loan. The ensuing outrage caused the SBP to caution banks from employing hostile tactics when recovering loans. It is a sad reflection on society when defaulters of small loans are hunted down, while the multi-million rupee loans of the well-connected are written off.
Consumers have yet to see any respite in prices of essential items after Eid as rates of some items, especially vegetables have climbed to an all time high. The government, which is now more engaged in post-flood situation, besides striving hard to save the current setup, has not taken any serious measures to contain food inflation. For instance, the wholesale rate of sugar, after reaching the peak of Rs78 per kg ahead of Eid, has now come down to Rs76.50 per kg...
A report in this newspaper yesterday suggests the defence budget has been quietly hiked by an astonishing 25 per cent, from the budgeted figure of Rs442bn to over Rs550bn. As usual, neither the government nor the military has seen fit to divulge any details, making it difficult to comment on the need for such an extraordinary increase. A few comparisons may put the figure of Rs110bn in the proper perspective. Rs110bn is close to half the amount public-sector enterprises rack up in losses each year — a key area of reform and restructuring that the international financial institutions have been emphasising. Rs110bn exceeds the entire gains that the reformed General Sales Tax is expected to make. The sum is also roughly equal to the amount which would be raised by the controversial ‘flood tax’ that has been mooted. One single head of expenditure, then, is already set to absorb all the revenue gains that are expected to be made this year — even before those gains are realised. Surely, the public is owed an explanation.
The share of tax revenues distributed to provinces rose significantly in 2010-11 under NFC and since spending responsibilities have not yet been transferred, the federal budget expected provinces to save most of the additional funds and run surpluses this fiscal year.
Nevertheless, subsidy needs for the electricity sector are to be determined and will likely to exceed the Rs30 billion or 0.2 per cent of GDP, provided in the budget. The report also showed concern that new ‘circular debt’ in the energy sector continues to accumulate. . Initial estimates from the State Bank put loan losses related to floods at about Rs54 billion, of which Rs34 billion are loans to agriculture.Although significant, this is unlikely to materially affect the banking system as total private sector loans amount to close Rs3 trillion.
Services sector posted a deficit of $567 million in July-August of current fiscal year as compared to $481 million in corresponding period of last fiscal year, depicting an increase of 17.87 percent or $86 million. Export of Services trade mounted by 5 percent or $27 million to $589 million in first two months of current fiscal year relative to $562 million in same period of last fiscal year. Similarly, imports under services sector registered an increase of 11 percent due to high payments on account of transportation, travel services, insurance, technical fee, royalties and government sector. Services sector imports stood at $1.156 billion in July-August of fiscal year 2010-11 as compared to $1.043 billion in corresponding period of fiscal year 2009-10, depicting an increase of $113 million.
The foreign investors have repatriated over 100 million dollars abroad on account of profit and dividend, despite slackness in the Pakistan's economy and global economic recession. However, repatriated amount during the first two months of the current fiscal year is some 3.4 percent lower than the repatriation in the same period of the last fiscal year 2010.The central bank on Friday revealed that country has attracted 171.4 million dollars foreign direct investment (FDI) in July-August of current fiscal year related to 344.5 million dollars in the same period of fiscal year 2010. Foreign investors have repatriated 85.7 million dollars on account of return on FDI in the first two months of the current fiscal year over the 90.8 million dollars in the same period of the last fiscal year, depicting a decline of 14 percent. While, during the period return on foreign private investment has posted an increase of 12 percent or 1.6 million dollars to 15.2 million dollars from 13.2 million dollars. Only 8 sectors out of some 36 sectors, showed increase in the repatriation of profit, while remaining all sectors depicting downward trend. Beverages, Textile, Fertiliser and personal services are leading sector, where from not a penny has sent abroad by the foreign investors. The major repatriation has registered from the power sector, where from foreign investors has repatriated 47 million dollars in July-August of fiscal year 2010-2011 over the repatriation of 34 million dollars in corresponding period of the last fiscal year, depicting an increase of 38 percent. It may be mentioned here that the government of Pakistan has allowed a 100 percent repatriation of profit to the foreign investors. Therefore, foreign investors are fully enjoying the government's policy by transferring their profit back since 2004.
Mohsin said the country could take a full advantage of the present energy limitations in Bangladesh and serious wage hike in China, as few international buyers have started turning faces to Pakistan, now. "Pakistan should reap the full benefit of this situation and increase exports to improve trade deficit," he urged the government. With a firm belief, he said advantage of VAT imposition was almost negligible as compared to huge export loss. He urged the government to revisit its decision on VAT imposition to save the export industry from a possible collapse.
Despite a short fall of about 1.5 million tons in rice production due to devastating floods, Pakistan will be able to export rice worth $2 billion during FY 2010-2011. Former Chairman Rice Exporters Association of Pakistan (Reap) and a prominent rice exporter, Azhar Akhtar, told Business Recorder on Saturday that Pakistan has about 0.8 million tons of milled rice worth $800 millions as a carryover of the previous crop. He said the demand of Pakistan's superior quality basmati rice is picking up in the international market at a rate of $1050 to $1100 per ton. Akhtar said though the unprecedented floods have damaged rice over 7,08,000 hectares area out of the total of 2.64 million hectors, especially in Sindh, yet Pakistan is likely to produce about 5 millions tons of basmati and other rice varieties this season against the target of 6 million tons of rice. The country consumes about 2.2 million tons annually and exports the surplus quantity of rice.
The Inter-national Monetary Fund (IMF) has observed that the government of Pakistan is spending $2 billion a year on subsidising power, and urged it to reform the power sector so that support is directed at the poor and the needy, and not in an untargeted fashion.
The 10 percent income tax surcharge is estimated to generate additional revenue of around Rs 55 billion. According to sources, it is expected that the government may issue ordinance for imposition of 1.5 percent flood disaster duty on non-essential imports. The duty is estimated to generate additional revenue of Rs 11 billion for the flood affected population of the country.
Saturday, September 4, 2010
Cotton production has declined by 22.95 percent as the arrival recorded at ginneries as on September 1 stood at 9,95,191 bales, showing a decrease of 22.95 percent over the corresponding period of the last year when ginneries received 12,91,550 bales.
At majority of the retail outlets of the city sugar was available at Rs 85 per kg, which is higher compared to its previous rate of Rs 75 per kg. Prices of fruits and vegetable remained all time high. Bananas were available at Rs 120 per dozen against its previous price of Rs 100; mango was available at Rs 90 per kg compared to Rs 70 last week. Similarly apple was available at Rs 120 compared to its previous price Rs 100 per kg and guava at Rs 90 per kg against its previous price of Rs 70. Price of tomato went up from Rs 60 per kg to Rs 80 during last week. Price of onion registered an increase of Rs 10 per kg and sold at Rs 50 per kg in contrast to last week's price of Rs 40 per kg. Similarly price of potato registered an increase of Rs 13 per kg and reached Rs 45 per kg in contrast to last week's total of Rs 32 per kg. People from all walks of life expressed serious concerns over the price hike in the kitchen commodities. They criticised the government for failing to provide relief to the poor masses and to keep check on price hike.
Reliable sources told The Express Tribune that the government has chalked out a two-tier plan to place a cut of up to Rs180 billion on federal and provincial budgets aimed at remaining within the IMF-agreed budget deficit target (a gap between the income and expenditure) of Rs685 billion or 4 per cent of the total size of the economy. According to officials, the federal government would save up to Rs90 billion by cutting the development programme and withdrawing subsidies. The plan is based on the assumption that the Federal Board of Revenue would achieve the Rs1.667 trillion tax collection target. But officials claimed that FBR has informed the government that it may miss the tax target by Rs50 billion. In that scenario, the federal government would have to look for other avenues to slash expenditures of equal amount in the wake of the worst flooding in the country’s history. The federal government has also asked the provinces to cut their annual development programmes in order to create fiscal space, necessary to adhere to the Rs685 billion fiscal deficit target for fiscal 2010-11. Officials said that now the provinces have been asked to create a fiscal space of up to Rs90 billion to remain within the overall fiscal framework.
Official statistics showed that the federal government transferred Rs633.4 billion to the provinces from July 2009 to June 2010 as their share in federal taxes under the Distribution of Revenue and Grant-Aid Amendment Order 2006. Though the transfers remained Rs22 billion short of allocations, these helped the provinces to finance 80 to 96 per cent of their budgets. The remaining financing was either received through provincial taxes, non-tax revenues, federal grants or borrowing from banks. However, the historical seventh National Finance Commission Award has changed the distribution mechanism and now other indicators like resource generation, poverty and disparity are also being considered. This has shrunk the Centre’s share from 55 to 46 per cent and will help provinces to get more resources but may lead to loss of provincial taxes due to the provincial governments’ inability to net the actual potential. Punjab’s total income, including federal share, stood at Rs401.6 billion and it incurred expenditures of Rs435.5 billion, recording a deficit of Rs33.8 billion. Sindh, the second most populated province, got Rs188.4 billion from the Centre, which was Rs5.7 billion less than allocation. Sindh was the worst performer in terms of resource mobilisation as it collected just Rs21.6 billion in taxes, the same as in 2008-09. Provincial taxes could only finance 8.6 per cent of expenditures and were less than 10 per cent of total revenues. It also puts a question mark on Sindh’s claim to collect sales tax on services, a cause of delay in implementation of reformed General Sales Tax.
Sindh’s budget deficit remained at Rs10.5 billion. Its total revenue amounted to Rs241 billion while expenses were Rs251.5 billion. Its 79 per cent budget was financed through receipt of federal taxes. The Khyber-Pakhtunkhwa government could only collect Rs2.4 billion in taxes, just Rs187 million more than fiscal year 2008-09. Its taxes could only finance 1.7 per cent of total expenditures and the government heavily relied on the Centre. The province got Rs80 billion from the federal divisible pool compared to its share of Rs85.4 billion. Its total revenue stood at Rs152.4 billion against spending of Rs142 billion, generating a surplus of Rs10.3 billion. The Balochistan government also could not mobilise provincial resources. It collected Rs1 billion in taxes, Rs167 million more than the year 2008-09. Provincial taxes helped to finance just 1.4 per cent of expenditures. Taking into account all income sources, including non-tax revenue, the provincial government could finance just 4 per cent of expenditures, depending on the federal pool for the remaining 96 per cent.
Sugar production in fiscal year 2009-10 amounted to 3.1 million tons and carryover stocks from 2009 were 500,000 tons. However, this year Pakistan does not have any carryover stocks. Average sugar production in one year has been around 3.7 million tons.
“We need to respond strongly to the crisis at hand, but we need to do it without losing sight of important economic reforms,” said Mr Zoellick while emphasising the need to continue the reforms Pakistan negotiated with the World Bank Group two years ago. Mr Strauss-Kahn went a step ahead and indicated that Pakistan had already pledged to continue those reforms. “Our dialogue with Pakistan on the current Standby Arrangement is progressing and the authorities have expressed their intention to implement measures for the completion of the fifth review of the programme later this year,” he said. "We will stay in close contact as these efforts proceed. Completion of the fifth review will allow the Fund to disburse an additional $1.7 billion, bringing total IMF disbursements (including emergency assistance) to $2.2 billion in the second half of 2010,” Mr Strauss-Kahn said. Pakistan pledged to implement tax and energy sector reforms, reduce inflation, curb budget deficit and give full autonomy to the State Bank.
Surely, the answer should be to begin to plug the loopholes in the tax system that allow people to evade taxes. Why must the already taxed be burdened some more when so many enjoy comfortable lives outside the tax net? If a 10 per cent flood surcharge on income already taxed can yield Rs100bn as estimated, then simply going after those evading the existing income taxes could yield several times that amount.
During the last fiscal year, the government made record borrowing from commercial banks as it was bound to remain within the limit while borrowing from the State Bank under an agreement with the IMF. Official data issued on Aug 31 showed that last year’s fiscal deficit was 6.3 per cent (or Rs929 billion) of Gross Domestic Product (GDP). It was much higher than 5.2 per cent (or Rs680 billion) deficit of the preceding year. One of the major reasons of massive borrowing is poor performance of economy. The government still claims that rate of growth could be around two per cent while many economists, including some government advisors, believe that the rate of economic growth would be zero per cent. Experts said inflation could be as high as 25 per cent due to disaster caused by floods. So far, the government has not borrowed from commercial banks, instead it made net retirement of Rs44.7 billion compared to Rs54.6 billion borrowed last year during the same period.
At majority of the retail outlets of the city sugar was available at Rs 85 per kg, which is higher compared to its previous rate of Rs 75 per kg. Prices of fruits and vegetable remained all time high. Bananas were available at Rs 120 per dozen against its previous price of Rs 100; mango was available at Rs 90 per kg compared to Rs 70 last week. Similarly apple was available at Rs 120 compared to its previous price Rs 100 per kg and guava at Rs 90 per kg against its previous price of Rs 70. Price of tomato went up from Rs 60 per kg to Rs 80 during last week. Price of onion registered an increase of Rs 10 per kg and sold at Rs 50 per kg in contrast to last week's price of Rs 40 per kg. Similarly price of potato registered an increase of Rs 13 per kg and reached Rs 45 per kg in contrast to last week's total of Rs 32 per kg. People from all walks of life expressed serious concerns over the price hike in the kitchen commodities. They criticised the government for failing to provide relief to the poor masses and to keep check on price hike.
Reliable sources told The Express Tribune that the government has chalked out a two-tier plan to place a cut of up to Rs180 billion on federal and provincial budgets aimed at remaining within the IMF-agreed budget deficit target (a gap between the income and expenditure) of Rs685 billion or 4 per cent of the total size of the economy. According to officials, the federal government would save up to Rs90 billion by cutting the development programme and withdrawing subsidies. The plan is based on the assumption that the Federal Board of Revenue would achieve the Rs1.667 trillion tax collection target. But officials claimed that FBR has informed the government that it may miss the tax target by Rs50 billion. In that scenario, the federal government would have to look for other avenues to slash expenditures of equal amount in the wake of the worst flooding in the country’s history. The federal government has also asked the provinces to cut their annual development programmes in order to create fiscal space, necessary to adhere to the Rs685 billion fiscal deficit target for fiscal 2010-11. Officials said that now the provinces have been asked to create a fiscal space of up to Rs90 billion to remain within the overall fiscal framework.
Official statistics showed that the federal government transferred Rs633.4 billion to the provinces from July 2009 to June 2010 as their share in federal taxes under the Distribution of Revenue and Grant-Aid Amendment Order 2006. Though the transfers remained Rs22 billion short of allocations, these helped the provinces to finance 80 to 96 per cent of their budgets. The remaining financing was either received through provincial taxes, non-tax revenues, federal grants or borrowing from banks. However, the historical seventh National Finance Commission Award has changed the distribution mechanism and now other indicators like resource generation, poverty and disparity are also being considered. This has shrunk the Centre’s share from 55 to 46 per cent and will help provinces to get more resources but may lead to loss of provincial taxes due to the provincial governments’ inability to net the actual potential. Punjab’s total income, including federal share, stood at Rs401.6 billion and it incurred expenditures of Rs435.5 billion, recording a deficit of Rs33.8 billion. Sindh, the second most populated province, got Rs188.4 billion from the Centre, which was Rs5.7 billion less than allocation. Sindh was the worst performer in terms of resource mobilisation as it collected just Rs21.6 billion in taxes, the same as in 2008-09. Provincial taxes could only finance 8.6 per cent of expenditures and were less than 10 per cent of total revenues. It also puts a question mark on Sindh’s claim to collect sales tax on services, a cause of delay in implementation of reformed General Sales Tax.
Sindh’s budget deficit remained at Rs10.5 billion. Its total revenue amounted to Rs241 billion while expenses were Rs251.5 billion. Its 79 per cent budget was financed through receipt of federal taxes. The Khyber-Pakhtunkhwa government could only collect Rs2.4 billion in taxes, just Rs187 million more than fiscal year 2008-09. Its taxes could only finance 1.7 per cent of total expenditures and the government heavily relied on the Centre. The province got Rs80 billion from the federal divisible pool compared to its share of Rs85.4 billion. Its total revenue stood at Rs152.4 billion against spending of Rs142 billion, generating a surplus of Rs10.3 billion. The Balochistan government also could not mobilise provincial resources. It collected Rs1 billion in taxes, Rs167 million more than the year 2008-09. Provincial taxes helped to finance just 1.4 per cent of expenditures. Taking into account all income sources, including non-tax revenue, the provincial government could finance just 4 per cent of expenditures, depending on the federal pool for the remaining 96 per cent.
Sugar production in fiscal year 2009-10 amounted to 3.1 million tons and carryover stocks from 2009 were 500,000 tons. However, this year Pakistan does not have any carryover stocks. Average sugar production in one year has been around 3.7 million tons.
“We need to respond strongly to the crisis at hand, but we need to do it without losing sight of important economic reforms,” said Mr Zoellick while emphasising the need to continue the reforms Pakistan negotiated with the World Bank Group two years ago. Mr Strauss-Kahn went a step ahead and indicated that Pakistan had already pledged to continue those reforms. “Our dialogue with Pakistan on the current Standby Arrangement is progressing and the authorities have expressed their intention to implement measures for the completion of the fifth review of the programme later this year,” he said. "We will stay in close contact as these efforts proceed. Completion of the fifth review will allow the Fund to disburse an additional $1.7 billion, bringing total IMF disbursements (including emergency assistance) to $2.2 billion in the second half of 2010,” Mr Strauss-Kahn said. Pakistan pledged to implement tax and energy sector reforms, reduce inflation, curb budget deficit and give full autonomy to the State Bank.
Surely, the answer should be to begin to plug the loopholes in the tax system that allow people to evade taxes. Why must the already taxed be burdened some more when so many enjoy comfortable lives outside the tax net? If a 10 per cent flood surcharge on income already taxed can yield Rs100bn as estimated, then simply going after those evading the existing income taxes could yield several times that amount.
During the last fiscal year, the government made record borrowing from commercial banks as it was bound to remain within the limit while borrowing from the State Bank under an agreement with the IMF. Official data issued on Aug 31 showed that last year’s fiscal deficit was 6.3 per cent (or Rs929 billion) of Gross Domestic Product (GDP). It was much higher than 5.2 per cent (or Rs680 billion) deficit of the preceding year. One of the major reasons of massive borrowing is poor performance of economy. The government still claims that rate of growth could be around two per cent while many economists, including some government advisors, believe that the rate of economic growth would be zero per cent. Experts said inflation could be as high as 25 per cent due to disaster caused by floods. So far, the government has not borrowed from commercial banks, instead it made net retirement of Rs44.7 billion compared to Rs54.6 billion borrowed last year during the same period.
Thursday, September 2, 2010
“We are in a very good position to cater demand from China, Pakistan and Bangladesh. They are in short supply and we have a bumper crop,” said Paresh Valia, an exporter based in Bhavnagar district in western Gujarat state.
“Fortunately India has five million bales of cotton surplus this year. The spinners have already confirmed orders for one million bales at $0.90-94 that have started arriving,” he added. He said there would be shortage of 2 million bales during October-March period and 2 million bales during April-September that would be covered through imports
Pakistan has only eleven helicopters for civilian needs, which is the lowest number in the region and insufficient to meet emergency needs like earthquake or floods, industry official said on Tuesday.
The devastation to roads has compounded infrastructure deficiencies of the country as the government added only 580km roads in two years (2008/10) against 5,052km roads in 2006/07 alone. Transport sector has been adversely impacted by the recent floods in Khyber-Pakhtunkhwa, Punjab and Sindh where most of the low quality roads were completely washed away or damaged. According to statistics, the development of high quality roads has been on decline since 1996/97, when 8,197km of hard-wearing roads and 3,725km of low quality roads were constructed. The new roads built during 1996/97 were 11,922km. In 2006/07 although the construction of sturdy roads was 7,470km, but the low quality types registered a decline of 2,418km as these were converted into developed roads. Due to heavily damaged road infrastructure, it is becoming exceedingly hard to transport relief goods to the flood-stricken people in far flung areas.
So far as the sources of higher profitability were concerned, this was primarily due to robust deposit growth, culminating in an increase in the earning assets, particularly investments in government securities, and wide spreads between lending and deposit rates. A sharp fall in the provisioning requirements also contributed a great deal in raising profits. Such a scenario developed because the government, in order to meet its budgetary requirements, kept borrowing heavily from commercial banks through treasury bills, while the banks found it convenient to hold risk-free earning instruments. It appears that the banks' profitability in the coming months would largely depend on two main factors, working almost in the opposite directions. A substantial increase in NPLs could be expected due to the massive floods, which have caused extensive damages, especially in the agricultural and SME sectors. This could result in higher provisioning and lower profitability. On the other hand, the government may have to increase its borrowings from the commercial banks to meet its growing needs and this could lead to higher profits. In balance, however, the banking sector of the country is expected to maintain a respectable level of profitability in the near future, without facing major hiccups.
Pakistan may miss the cotton production target by about 2.25 million bales due to devastation caused by the floods. At present, production of 11.75 million cotton bales is expected against the set target of 14 million bales for the year 2010/11, officials at Ministry of Food and Agriculture said. Cotton was sown on 3.199 million hectares, out of which cultivated area of 0.588 million hectares has been damaged.
Sources told Business Recorder here on Tuesday that the quarter-wise and monthly breakup of revenue collection target of Rs 1667 billion for 2010-11 has been issued to the Large Taxpayer Units and Regional Tax Offices incorporating amount to be collected from the services sector from second quarter of current fiscal year. The FBR has estimated to collect Rs 674.9 billion sales tax during 2010-11 taking into account the enforcement measures and potential of different sectors.
The three major car assemblers have more than 90 per cent share in local car sales. Pak Suzuki secured the highest profitability growth of 330 per cent, Indus Motor 55 per cent while Honda Atlas Car remained in the red though its losses dropped, according to the data compiled by Topline Research.
The government has deferred plans to export its surplus wheat, the minister for food and agriculture said on Monday, after devastating floods washed away grain stocks and raised concerns about the next crop. Pakistan, Asia’s third-largest wheat producer, said in April it would export 2 million tons of wheat after a bumper crop of 23.86 million tons in 2009-10, and a carryover of 4.2 million tons from the previous crop. But it held back exports because of low prices in the international market until a recent rally.
“Fortunately India has five million bales of cotton surplus this year. The spinners have already confirmed orders for one million bales at $0.90-94 that have started arriving,” he added. He said there would be shortage of 2 million bales during October-March period and 2 million bales during April-September that would be covered through imports
Pakistan has only eleven helicopters for civilian needs, which is the lowest number in the region and insufficient to meet emergency needs like earthquake or floods, industry official said on Tuesday.
The devastation to roads has compounded infrastructure deficiencies of the country as the government added only 580km roads in two years (2008/10) against 5,052km roads in 2006/07 alone. Transport sector has been adversely impacted by the recent floods in Khyber-Pakhtunkhwa, Punjab and Sindh where most of the low quality roads were completely washed away or damaged. According to statistics, the development of high quality roads has been on decline since 1996/97, when 8,197km of hard-wearing roads and 3,725km of low quality roads were constructed. The new roads built during 1996/97 were 11,922km. In 2006/07 although the construction of sturdy roads was 7,470km, but the low quality types registered a decline of 2,418km as these were converted into developed roads. Due to heavily damaged road infrastructure, it is becoming exceedingly hard to transport relief goods to the flood-stricken people in far flung areas.
So far as the sources of higher profitability were concerned, this was primarily due to robust deposit growth, culminating in an increase in the earning assets, particularly investments in government securities, and wide spreads between lending and deposit rates. A sharp fall in the provisioning requirements also contributed a great deal in raising profits. Such a scenario developed because the government, in order to meet its budgetary requirements, kept borrowing heavily from commercial banks through treasury bills, while the banks found it convenient to hold risk-free earning instruments. It appears that the banks' profitability in the coming months would largely depend on two main factors, working almost in the opposite directions. A substantial increase in NPLs could be expected due to the massive floods, which have caused extensive damages, especially in the agricultural and SME sectors. This could result in higher provisioning and lower profitability. On the other hand, the government may have to increase its borrowings from the commercial banks to meet its growing needs and this could lead to higher profits. In balance, however, the banking sector of the country is expected to maintain a respectable level of profitability in the near future, without facing major hiccups.
Pakistan may miss the cotton production target by about 2.25 million bales due to devastation caused by the floods. At present, production of 11.75 million cotton bales is expected against the set target of 14 million bales for the year 2010/11, officials at Ministry of Food and Agriculture said. Cotton was sown on 3.199 million hectares, out of which cultivated area of 0.588 million hectares has been damaged.
Sources told Business Recorder here on Tuesday that the quarter-wise and monthly breakup of revenue collection target of Rs 1667 billion for 2010-11 has been issued to the Large Taxpayer Units and Regional Tax Offices incorporating amount to be collected from the services sector from second quarter of current fiscal year. The FBR has estimated to collect Rs 674.9 billion sales tax during 2010-11 taking into account the enforcement measures and potential of different sectors.
The three major car assemblers have more than 90 per cent share in local car sales. Pak Suzuki secured the highest profitability growth of 330 per cent, Indus Motor 55 per cent while Honda Atlas Car remained in the red though its losses dropped, according to the data compiled by Topline Research.
The government has deferred plans to export its surplus wheat, the minister for food and agriculture said on Monday, after devastating floods washed away grain stocks and raised concerns about the next crop. Pakistan, Asia’s third-largest wheat producer, said in April it would export 2 million tons of wheat after a bumper crop of 23.86 million tons in 2009-10, and a carryover of 4.2 million tons from the previous crop. But it held back exports because of low prices in the international market until a recent rally.
Tuesday, August 31, 2010
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.
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.
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.
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