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.

“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.

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 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.

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 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.

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.