Pakistan Economy - News & Updates - Archive

[Neo]

May 23, 2007
Eatables import bill hits record $2.36 billion

ISLAMABAD, May 22: The country’s food import bill reached to the highest ever level of $2.360 billion during the first 10 months of the current fiscal year, up by 5.31 per cent from $2.24 billion the same period last year.

The eatables import has been on the rise for the last two years as the government has failed to ensure increase in production of some farm products like sugar, pulses etc., which were imported in bulk for meeting domestic demand.

It is expected that the import bill of food items will touch $3 billion mark by June 30, 2007.

The scaling down of tariffs on consumer items also encouraged the inflow of foreign brands which flooded the local market hurting the domestic manufacturers and farmers as a result of ill-conceived policies of the government for liberalising trading regime.

Official figures compiled by the Federal Bureau of Statistics (FBS) showed that the import of milk products increased by 36.86 per cent to $65.464 million during the July-April period as against $47.832 million; an increase of 60.56 per cent in pulses’ import to $217.854 million as against $135.686 million, 22.61 per cent rise in palm oil to $731.146 million as against $596.302 million during the same period last year.

The import of dry fruits increased by 24.4 per cent to $56.474 million during the period under review as against $45.397 million, 2.11 per cent rise in spices to $44.879 million as against $43.953 million and 11.4 per cent increase in import of all other food items to $730.851 million as against $656.031 million over the corresponding period last year.

The analysis of other commodities showed that the import bill of petroleum products rose by 12.03 per cent to $5.883 billion during the July-April period as against $5.251 billion the same period last year.

It indicated that the import of products manufactured from petroleum increased by 38.64 per cent to $3.008 billion during the period as against $2.170 billion the same period last year.

However, the import bill of

petroleum crude declined by 6.71 per cent to $2.874 billion during the first 10 months of this fiscal year as against $3.081 billion over the same period last year.

The second biggest component of the import bill in value was the machinery group. However, its imports increased by 12.22 per cent in July-April period to $5.443 billion as against $4.850 billion over the corresponding period last year.

The import bill of machinery mainly pushed by an increase of 42.93 per cent in power generating machinery, office machines 8.65 per cent, construction machinery and agriculture machinery 46.89 per cent.

However, the textile machinery declined by more than 34.84 per cent during the period under review over the last year.

In the telecom sector, the import of mobile phones increased by 28.05 per cent and other apparatus by 11.24 per cent during the July-April period.

http://www.dawn.com/2007/05/23/ebr5.htm

 

[Neo]

May 23, 2007
UN plan to help Asian states achieve MDGs

Karachi, May 22: Government ministers from across the Asia-Pacific region have expressed support to a roadmap, which aims to help the poor countries lagging behind to achieve the Millennium Development Goals (MDGs) by 2015, a UNESCAP press release posted on its website said.

The blueprint, set out by the United Nations Economic and Social Commission for Asia and the Pacific (UNESCAP), was discussed at its annual ministerial meeting held in Almaty, Kazakhstan.

Mr Kim Hak-Su, under secretary general of UNESCAP applauded the commitment from the member states. The objective of the plan, he said, was to add value to national level strategies and processes,” targeting those off-track countries and those below the Asian average.”A paper presented by UNESCAP for the session says, “Not all developing countries are making adequate progress towards achieving the goals; and none are presently on track to meet all the goals by 2015.”

The roadmap aims to have all countries marginally off-track to be back on-track towards reaching MDGs by 2009. It also aims for those moderately off-track to be in line by 2011, and those in the severely off-track category to be on target by the end of 2013.

The roadmap proposes a multi-track approach, including enhancing MDG-related legislations and strengthening partnerships, such as that between UNESCAP, UNDP, and the Asian Development Bank on promoting MDGs.

It emphasises the involvement of all the stakeholders — the government, the private sector, non-government organisations, research and academic institutes, and international organisations.

The proposals are intended to be fed into national development strategies, which need to be monitored and evaluated as well as to be fully resourced. The roadmap also calls for regional cooperation to help off-track countries with capacity development, expertise, resources and advocacy.

There was overwhelming support from ministers at the meeting. Deputy Prime Minister of Mongolia Mendsaikhan Enkhasaikhan commended UNESCAP for the initiative.

Minister of Infrastructure and Public Utilities of Vanuatu Edward Natapei said his government was encouraged to see the high level of commitment by the UN agencies.

Mr. Marat Tazhin, minister of foreign affairs of Kazakhstan said the roadmap laid a good foundation and provided a unique opportunity for all nations to coordinate and redouble their efforts aimed at achieving the MDGs by 2015. The roadmap is expected to be endorsed by the commission session when it concludes on Wednesday.

http://www.dawn.com/2007/05/23/ebr11.htm

 

[Neo]

May 23, 2007
Development budget may be raised by 26pc

ISLAMABAD, May 22: The Annual Plan Coordination Committee (APCC) on Tuesday firmed up a Rs549 billion development budget for next year, which includes Rs35 billion for the rehabilitation of earthquake-hit areas.

The allocations for earthquake rehabilitation are about 30 per cent lower than the current year’s Rs50 billion, but the overall Public Sector Development Programme (PSDP) 2007-08 proposed by the APCC will be about 26 per cent higher than the current year’s PSDP of Rs435 billion.Having presided over the APCC, deputy chairman planning commission Dr Akram Sheikh told journalists that next year’s development budget stood at just under Rs549 billion. He said this included a Rs329 billion federal share, a Rs150 billion provincial share, Rs35 billion for the Khushhal Pakistan Programme, and Rs35 billion for the earthquake-hit areas. However, he said, the APCC recommendations need approval by the National Economic Council (NEC).

According to Dr Sheikh, the development programme was worked out on the basis of five principles: the completion of ongoing projects, the initiation of important new approved projects, the initiation of unapproved but crucial projects, the implementation of public commitments made by the president and prime minister and, finally, the equitable distribution of funds among the provinces.

Asked about ‘crucial unapproved projects’, Dr Sheikh said that the government would initiate projects such as cleaning up rivers that are polluted with industrial effluent.

In reply to another question, he said the government would make substantial allocations for the acquisition of land for large dams. Furthermore, the committee on dams headed by Dr Salman Shah, adviser to the Prime Minister on Finance and Revenue, will arrange the foreign funding required for the dams’ construction.

Dr Sheikh said that the government was laying greater emphasis on a knowledge-based economy, technical knowledge and vocational training, adding that the Vision 2030 document that is to be tabled before the NEC is a step in that direction. He said the government put great importance on the National Trade Corridor (NTC) project and substantial allocations would be made in next year’s budget for the construction and improvement of roads, railways and ports. Furthermore, the government would make the completion of Gwadar Port a priority in order to realise facilities such as the Free Trade Zone and Oil City.

http://www.dawn.com/2007/05/23/top8.htm

 

[Neo]

Wednesday, May 23, 2007

Cotton import from India to reach 3.5m bales

By Razi Syed

KARACHI: The cotton import from India is estimated to be at around 3.5 million bales this season, due to a growing demand of textile and spinning sectors, traders said on Monday.

They said despite the government’s target of 14.14 million cotton bales for the crop season 2007-08, there would be a shortfall of around 3.1 million bales.

A senior trader, Ghulam Rabbani, said according to the International Cotton Advisory Committee (ICAC), among top ten global producers of cotton, China is likely to produce 29.96 million bales (each bale 480 pounds) in 2007-08, the USA will stand second in production with 19.66 million bales, India will produce 21.45 million bales and Pakistan will produce 10.16 million bales. The total world production is likely to reach 115.83 million bales.

He said the world consumption is estimated around 122.64 million bales, a shortfall of 6.81 million bales. China is the top consumer of global cotton with 50.04 million bales, India with 19.24 million bales, Pakistan with 12.20 million bales and the USA with 4.50 million bales.

He said the world production would face a shortfall around 6.81 million bales, while Pakistan would face a shortfall of around 3 million bales.

Mr Rabbani said the mills purchased around 11.80 million bales up till May 1, out of the total production of 12.40 million bales in crop season 2006-07.

The mills also imported 1.75 million bales from the USA, India and other major cotton cultivation countries during this period, he added.

The spinning sector bought the remaining lots of around 600,000 bales besides imports from India and the USA, which stand at around 100,000 bales during this period.

He said in Punjab, cotton would be sown on 6.326 million acres and Sindh cultivate cotton on 1.581 million acres. NWFP and Balochistan will share the remaining 0.14 million area for cotton production in 2007-08.

http://www.dailytimes.com.pk/default.asp?page=2007\05\23\story_23-5-2007_pg5_5

 

[Neo]

World Bank Approves $350 Million Credit For Pakistan Reform Program

ISLAMABAD -(Dow Jones)- The World Bank Tuesday approved credit worth $350 million to support Pakistan's medium-term reform program aimed at sustaining rapid economic growth and reducing poverty.

The credit proceeds will finance reforms meant to maintain macroeconomic stability, improve management of public expenditure and assist power sector reforms, the World Bank said in a statement.

"Economic reforms are now contributing to increased investor interest from Pakistanis and foreign investors alike," said Yusupha Crookes, head of the World Bank in Pakistan.

"The ongoing reform program supported by this project will contribute to sustaining rapid growth."

The World Bank statement said that over the last six years, Pakistan has emerged as one of the fastest-growing economies in Asia on the back of rising per capita income and improving social indicators.

Economic growth has averaged 7% between fiscal years 2003-04 and 2005-06, while the poverty headcount ratio has fallen significantly in recent years, it said.

http://www.nasdaq.com/aspxcontent/N...CQDJON200705230409DOWJONESDJONLINE000277.htm&

 

[Neo]

Pakistan and Germany to set up joint chamber of commerce

ISLAMABAD (May 24 2007): Pakistan and Germany have agreed on the establishment of a joint chamber of commerce to help further strengthen their commercial co-operation. This was stated by Foreign Minister Khurshid Mahmood Kasuri and his German counterpart Dr Frank Walter Steinmeier while talking to newsmen after their talks at the Foreign Office here Wednesday.

They noted that there was a vast potential to enhance the mutually beneficial bilateral trade and investment. Foreign Minister Kasuri said Germany is Pakistan's second largest trading partner in Europe and one of the largest in the world with bilateral trade approaching two billion-dollar mark.

Dr Frank Walter said the European Union has decided to increase assistance for Pakistan and the country would now receive two hundred million euros during the next three years. Kasuri said they explored the possibility of strengthening relations especially in trade, investment, education, defence, culture, health-care, railways, power generation, engineering and oil and gas sectors.

He said the two countries also have substantial technical co-operation and agreed to build on that co-operation. Pakistan appreciates German co-operation for establishment of a technical university in Lahore and a vocational training institute in Karachi.

A number of postgraduate students are studying in German universities. Pakistan would like to increase this number substantially in coming years. He said Pakistan has conveyed its interest to see the opening of an office of German Academic Exchange Service in Pakistan to further promote relations in the field of education.

The Foreign Minister said the two countries have good co-operation in defence. More than 229 Pakistan armed forces officers have received training in Germany while 26 German officers have attended Staff College Quetta and the National Defence College.

Kasuri said there are also possibilities for co-operation between the two countries in defence procurement. Both countries want bilateral co-operation in defence to deepen to their mutual benefit. Referring to the cultural co-operation he said strengthening of Anna Marie Schimel House in Lahore to the level of an institute would help that process.

Pakistan also appreciates German co-operation in archaeological excavation in the NWFP and Balochistan. German Foreign Minister said his country is keen to enhance economic and commercial relations with Pakistan. He said Pakistan is very important partner of EU in Asia and has special significance in stability and peace in South and Central Asia.

http://www.brecorder.com/index.php?id=568091&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Gas and oil discovered in Hyderabad district

KARACHI (May 24 2007): The Oil and Gas Development Company Limited (OGDCL) has made a gas and condensate discovery from its Exploratory Well Thora Deep No 1 in Massive Sands of Lower Goru formation in Hyderabad. According to an information sent to the Karachi Stock Exchange here on Wednesday.

It was said that the well was drilled down to the depth of 3,906 meters in Thora and Thora East Mining Lease falling in district Hyderabad of Sindh. On the basis of open hole logs, two dozens of massive sand of Lower Goru formation were selected for testing.

Both the zones were tested, out of which the second zone proved as producing zone. The short duration initial testing results are including, Choke sizes 32/64 inches, WHFP (PSI) 1880, quantity of condensate 100 bpd, quantity of gas 9.90 mmscfd, quantity of water 120 bwpd and API gravity 44.9.

http://www.brecorder.com/index.php?i... rm=&supDate=

 

[Neo]

Wapda signs consultancy deal for 5,400 megawatts project

LAHORE (May 24 2007): Water and Power Development Authority (Wapda) has signed an agreement for providing consultancy services for feasibility study, detailed engineering design and preparation of tender documents of Bunji Hydropower Project with Bunji Consultants here at Wapda House on Wednesday.

Wapda's General Manager Hydro Planning Zia-ul-Hassan and Francis M. Griffin of Bunji Consultants singed the agreement on behalf of their respective organisations. Wapda Chairman Tariq Hamid, Member Water Muhammad Mushtaq Chaudhry and Member Power Fazal Ahamd Khan were also present o the occasion.

The proposed site of Bunji hydropower project, the biggest ever project in the history of Pakistan, with an installed capacity of 5400 MW is located 83 km downstream of Gilgit on the main Indus River. The project, on its completion is expected to contribute 20.75 billion units of electricity annually to the national grid. The PC-II of this 'run of the river' project has already been approved by ECNEC for conducting feasibility study. The study will be completed in three years. M/s Bunji Consultants comprises of five firms in all, including three foreign firms namely Mott McDonald of UK, Sogreah Consultants SAS of France and Nippon Koei of Japan and two Pakistani firms namely MM Pakistan and Development and Management Consultants.

http://www.brecorder.com/index.php?id=568126&currPageNo=2&query=&search=&term=&supDate=

 

[Neo]

FDI up 37pc, portfolio investment 80pc

ISLAMABAD: Foreign Direct Investment (FDI) to Pakistan during the first ten months of the current fiscal soared by 36.93 per cent year-on-year to $4.16 billion and portfolio investment (public and private) by 80 per cent to $1.82 billion the Central Bank reported on Wednesday.

During July-April 2006-07, FDI in absolute terms increased by 1.122 billion and portfolio investment by $808 million over corresponding period of the last fiscal when these stood at $3.038 billion and $1.01 billion respectively.

Therefore, on balance, the total net foreign investment (public and private) in ten months increased by 47.67 percent to $5.98 billion from $4.048 billion in corresponding period of the last fiscal.

It is pertinent to note that during 2005-06, total investment inflow had crossed $3.872 billion mark as against $1.676 billion in 2004-05. Moreover, for the current fiscal, there was hope of further improvement in foreign investment, especially with better macro-economic indicators and improvement in infrastructure.

A significant feature of the data was that though FDI inflow followed steep path right from the beginning of the new fiscal and increased enormously, portfolio investment was fluctuating from the beginning of the fiscal. However, during the period under review it showed a sizeable growth.

According to the break-up developed countries made a total investment of $3.485 billion including FDI $2.51 billion and portfolio investment of $979 million. The developing economies invested $1.499 billion (FDI $1.339 billion and $160 million portfolio investment).

Among developed countries, Western Europe made a total investment (FDI and portfolio) of $2.015 billion and European Union, $1.917 billion against $679.4 million and $286.5 million, respectively, in corresponding period of last fiscal. Besides, under unspecified head (investment by IFIs and other n.s.e) was $323.4 million. This includes FDI of $315.4 million and eight million dollars portfolio investment. Among developing economies, Caribbean Islands invested $16.8 million FDI and $1.2 million portfolio investment during the period under review. Africa, including Libya, Egypt, Mauritius, South Africa and other African countries invested $80.1 million.

Asian countries (West Asia, South, East and South East Asia) made total investment of $1.398 billion including $1.248 billion FDI and $150.9 million portfolio investment.

The break-up of investment further indicated that United States (US) was the biggest investor in Pakistan by investing $1.346 billion including $676.7 million FDI and $669.4 million portfolio investment.

United Kingdom (UK) was next with total investment of $1.107 billion, including FDI of $724.4 million and portfolio investment of 382.3 million dollar. Netherlands was third with total investment $759.1 million including direct investment of 753.4 million and $5.7 million portfolio investment. Followed by China with $708.9 million direct investment and zero portfolio investment.

United Arab Emirates (UAE) also invested $383.8 million as it injected $364.2 million FDI and $19.5 million portfolio investment in the economy.

http://www.thenews.com.pk/daily_detail.asp?id=57307

 

[Neo]

Thursday, May 24, 2007

Machine imports grew substantially in July-April

* Textile machinery imports continued to dip

By Tanveer Ahmed

KARACHI: The import of machinery grew substantially by 43 percent in the first ten months of the current financial year, on back of a major surge in power generating machinery imports.

Although, the overall import of machinery import was up by 12.22 percent, the textile machinery import dipped further by over 34 percent, which reflects the lack of interest of the textile industry to import textile machinery for expansion, because of the intense competition that the textile products confront in the international market.

The total import bill of machinery group stood at $5.44 billion in July-April period of 2006-07, as against $ 4.85 billion in the same period of the previous year.

The cause for the rise in demand for power generating machinery is the acute power shortage across the country.

“We will see an increase in import of power generating machinery in coming days as there seems to be no let up in power breakdowns and load-shedding in the near future,” an analyst of foreign trade opined.

Commenting on the falling import of textile machinery, a textile exporter said that the import of textile machinery had started declining since the closing days of the previous financial year, when the industry, foreseeing an intense competition and lack of competitiveness of textile products, stopped placing import orders for textile machinery.

“The investment in the sector has come almost to a halt and the industry lacks interest to go for further expansion in the present scenario,” he said adding that textile machinery import would witness more decline in days to come.

In the machinery import category, the office machinery depicted a growth of 8.65 percent, construction and mining machinery was down by 1.28 percent, electrical machinery and apparatus import rose by 35 percent, mobile phone import up by 17 percent, agricultural machinery was up by 47 percent and other machinery rose by 13 percent.

In other import categories, the import of metal group was down by 11.52 percent in July-April of current financial year. The import of almost all items gold, iron and steel scrap, iron and steel declined during the period under review.

The import bill of agricultural and other chemical groups was marginally up by 0.61 percent, textile group import was up by 18.45 percent, the miscellaneous group import was also up by 11.74 percent, food group up by 5.31 percent, transport group import up by 11.65 percent, petroleum group import up by 12 percent.

The most significant among various import categories is the rising import of goods in the “other items” group. It has never been disclosed by the government what is being imported under this group, in which imports went up heavily by 35 percent to $1.90 billion in the first ten months as against $ 1.41 billion in the corresponding period of previous year.

The country’s total import bill stood at $24.99 billion in July-April of 2006-07 as compared with $22.94 billion in the same period of previous year and the total import bill is expected to be over $28 billion.

http://www.dailytimes.com.pk/default.asp?page=2007\05\24\story_24-5-2007_pg5_1

 

[Interceptor]

Planning Commission approves Rs 11.7 b for development

ISLAMABAD, May 17 (Online): The Planning Commission has approved thirty nine projects of infrastructure, social sector and other projects worth Rs 11.7 billion. The decision was taken in a meeting of Central Development Working Party (CDWP) chaired by Deputy Chairman of Planning Commission Dr Muhammad Akram Sheikh here on Thursday. Earlier, CDWP had approved Rs 403.9 billion for 352 projects giving priority to construction of new dams, improvement of environment and projects about commerce and industries, as has been notified by a spokesperson of Planning Commission Asif Sheikh in a press conference. Member of Planning Commission were also present on the occasion. �Two projects of science and technology worth of Rs 450 million, nine projects of transport and communication worth of Rs 4.9 billion, five projects of water worth of Rs 2 billion, nine projects of physical planning and housing worth Rs 1.5 billion, three project of higher education worth of Rs 986 billion, four projects of industries and commerce worth of Rs 995 million, two project of gorsan worth of Rs 213.58 million, one project of worth Rs 358 million and one project of environment worth of Rs 239 million had been spent,� he held. Twenty six projects of infrastructure, six projects of social sectors, and seven projects of science and technology worth Rs 8.5 billion, Rs 1.4 billion and 1.8 billion have respectively been approved worth Rs 11.7 billion have been approved, he maintained adding that Rs 1 billion foreign aid is also included in the allocated money in which will be spent on social sector .

He said that Rs 1.7 billion had been allocated for Punjab for seven projects, Rs 1.8 billion for five projects of Sindh, Rs 1.6 billion for ten projects of NWFP, Rs 3.3 billion for six projects of Balochistan whereas eleven projects worth of Rs 3.3 billon for entire country. Rs 0.2 billion for Sindh and Rs 0,8 billion loan for entire country has also been included in the development plan .

Two projects out of five of Sindh have been approved for Karachi worth Rs 30 billion as announced by President Pervez Musharraf and which would be provided by federal government, Sindh government and State Bank, he pointed out. He said ten projects of NWFP had been allocated for water reservoirs and Rs 214 million, 138 million and 331 million had been approved for Loar, Karak and Dar Malik dams respectively .

He said that 36 projects out of 39 projects approved in eleventh meeting have been sanctioned whereas three projects worth Rs 500 million each had been sent to ECNEC for approval. Height of Merani Dam would be raised to 264 feet by uprising of 20 feet, he pointed out. While talking to Online, Member of Infrastructure Planning Commission Dr Asad Ali Shah said that feasibility of Basha Dam was in final phases and work on this project would be started in 2009-10 worth of Rs 13.8 billion.

http://www.paktribune.com/news/index.shtml?178498

 

[Neo]

Forex loans and bond issue to keep borrowing within budgetary target: treasury bills stocks hit Rs 705 billion

KARACHI (May 25 2007): The stock of debt of the federal government from the banking system continues to rise in the current year in the hope that counter rupee generated from inflow of expected dollar loans and forthcoming forex bond issue flotation would retire this debt and also keep the bank borrowing within the budgetary target of Rs 140.01 billion.

Government borrowings, which is on a constant rise, and as of May 12, has spiked to Rs 212 billion against its target of Rs 120 billion. This is countering the SBP's efforts to curb inflation.

Money Supply (M2) has, so far, breached its fiscal target of 13.46 percent hitting 13.99 percent as of May 12 mainly due to external flows. Had the central bank not taken proactive measure of mopping up of commercial flows, the M2 figure would have busted badly.

T-bills outstanding stock, which was Rs 468 billion as of June 2006 has risen to Rs 705 billion. Similarly, against year-to-date (YTD) Pakistan Investment Bonds (PIBs) maturity of Rs 33.4 billion, the SBP has sold PIBs worth Rs 71.2 billion through last four auctions, with another Rs 15 billion PIB auction due in this fiscal year. Hence, against last June stocks, through T-bills and PIB auctions, so far roughly Rs 275 billion in excess has been drained out of the system, with two more T-bills auction due before June-end, the maturing T-bills amount is Rs 41.8 billion and with PIB maturity of Rs 9 billion.

The Asian Development (ADB) has already provided loans amounting to Rs 700 million - already exceeding the budgetary estimate of $500 million - and further $200 million expected before June-end.

The World Bank was envisaged to provide $700 million this year, but thus far has not disbursed this amount due to non-fulfilment of certain conditionalities attached with the loan; like revision of the electricity tariff. After the recent increase in power tariff, Islamabad is confident that this amount will be released within the next seven weeks. According to informed sources the World Bank board has approved a loan of $350 million this week and disbursement is awaited.

Yesterday's successful floatation and acceptance of $750 million in the Eurobond issue is expected to retire government debt by Rs 45 billion along with privatisation proceeds (Rs 15 billion) will reduce government's bank borrowing by Rs 60 billion, which would also help to bring the M2 growth figure within its target level.

The State Bank of Pakistan (SBP) in its fortnightly Treasury Bills auction, held on Wednesday, maintained its target amount by accepting Rs 7.95 billion against its target of Rs 8 billion. The market's offered amount was Rs 16.1 billion and the realised amount is Rs 7.322 billion.

Interest was again seen in 12-month paper due to better yield offered in longer term paper. The gap between three-month and six-month versus 12-month paper is of 42.5 basis points and 21 basis points, respectively. Discount rate is 9.5 percent.

In three-month, previous cut-off yield of 8.6869 percent was maintained and the accepted amount was Rs 500 million, in six-month by maintaining previous cut-off yield of 8.9017 the accepted amount was Rs 50 million and in 12-month, the SBP did not hesitate to inch up yield and against previous cut-off yield of 9.1 percent it accepted Rs 7.4 billion at a cut-off yield of 9.1119 percent.

"The central bank preferred to stay within the target, though it could have lifted additional Rs 6.35 bullion by raising the yield by a mere 2.4 basis points", says a chief dealer of a foreign bank.

SBP hesitancy, he said that is understandable, since liquidity conditions are already tight. On last Wednesday alone, there was discounting of Rs 9 billion by banks from the SBP window to square off their books. For the last four weeks, tight liquidity condition has persisted and frequent use of SBP discount window by banks was observed, he added.

Throughout the current fiscal year, SBP's monetary stance has been very clear. It has kept the market conditions tight for the last four continuous weeks. In the last quarter of this fiscal year, the average overnight borrowing has jumped to 8.75 percent from FY 8.5 percent. In May, average overnight borrowing cost may have risen to 9.25 percent.

While the SBP has announced fifth PIB auction, due on June 5, which is re-opening of old scrip, with target amount of Rs 15 billion. So far, trading activity in PIBs has been very thin. Though there are queries only from the foreign investors, but none has shown any keenness, which is disappointing.

In real sense except for one or two corporates offering tiny amounts, only State Life Insurance Corporation (Slic) has so far shown interest in long-term government paper ie beyond 10 years. Slic is already holding over 90 percent of the long-term PIB stock.

Market gurus believe that Slic still has room to invest in long-term PIBs (due to absence of bond auction in the previous two years) and should be able to gulp additional Rs 50 billion worth of PIBs.

Meanwhile, the Pak rupee has maintained its strength with foreign exchange reserves hitting a new all-time high of Rs 13.8 billion. As the FY forex reserves target for June-end is thought to be Rs 14.5 billion, the rupee is unlikely to ease against the dollar, as another $1 billion could be added to the forex reserves portfolio due to Eurobond and privatisation receipts.

The Pak rupee could follow the regional currencies trend, which has gained substantially in current fiscal year against the dollar. The Philippine peso gained 13.14 percent, Thai bhat was up by 9.25 percent, Indonesian rupiah was stronger by 6.07 percent, Malaysian ringgit gained 7.75 percent and Indian rupee has so far gained Rs 11.56 percent.

Japanese yen was weaker by 6.33 percent, Sri Lankan rupee lost 6.63 percent, erratic moves were witnessed in Bangladesh taka due to political uncertainty, which in last six months has seen high of 70.6 and low of 63.50 per one dollar and is currently trading at 69.05, while Pak rupee which has lost 1.08 percent in the current fiscal year could narrow its losses.

http://www.brecorder.com/index.php?id=568462&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

$750 million accepted for Eurobond at 6.875 percent: Prime Minister

ISLAMABAD (May 25 2007): Pakistan has decided to accept offering of $750 million received for Eurobond at 6.875 percent interest. It is 40 basis points less than the bond floatation last year. We intend to raise $500 million through Eurobond issue, but it was oversubscribed by $3.538 billion which is 7 times more than the initial offer.

We have decided to accept offering of $750 million and the remaining will be returned to the investors, said Prime Minister Shaukat Aziz at a press conference. The bond was issued two days back and two teams comprising Advisor on Finance Dr Salman Shah, State Bank Governor Dr Shamshad Akhtar; and Advisor to Finance Ministry Dr Ashfaque Hasan Khan and Finance Secretary-General Nawid Ahsan conducted the road shows.

"I am very happy that the issue was oversubscribed as the investors expressed their confidence in Pakistan's policies, its economy and leadership," said Shaukat Aziz. The prime minister said: "The subscription is more than our expectations and this shows Pakistan's credit worthiness in the international capital market."

"The interest of investors was much better than the previous issues, the maturity period would be comparatively longer ie 10 years and the interest rate, too, would be less than previous issues," he added. He said in all about 200 investors subscribed to the issue. All the three regions - Asia, European Union, and United States - have almost equal representation in the subscription.

The prime minister expressed satisfaction over the development, saying the foreign direct investment (FDI) has already crossed $6 billion mark in the first eight months of the year. To a question, Shaukat Aziz said the funds generated through Eurobonds would be utilised for development. Replying to a question, he said the new budget would be pro-development and relief-oriented.

Shaukat Aziz said the budgetary proposals would contain measures to accelerate the pace of development for creating more job opportunities and fulfilling the needs of the common man.

Responding to a question, the prime minister said that the ban on wheat export has been imposed because of vast disparity in the price of the commodity in the domestic and international markets. He said the price of wheat is increasing in the international market and in the absence of ban the local market would have faced shortage of the commodity.

Answering another question, Shaukat Aziz said that PSO's privatisation was scheduled in June, but the Privatisation Commission could provide exact information on this issue.

http://www.brecorder.com/index.php?id=568485&currPageNo=1&query=&search=&term=&supDate=

 

[Neo]

Proposal for setting up 400 megawatts generating units approved

KARACHI (May 25 2007): The government has approved the proposal of an Australian company for establishing 400MW power-generating units based on Thar coal. According to a source Sindh Mines and Mineral Department on Thursday allowed the Australian based company, Cougar Energy (Pvt) Limited to go ahead with the project.

A Memorandum of Understanding (MoU) would be signed in a week's time, in this regard. The company will use underground gasification technology in generating the required power. In this system coal is burnt underground and the exertion of synthetic gases utilised for power generation.

The company would produce electricity from coal by applying latest method of underground gasification technology that has been already working successfully in three countries of the world, source said. The advantage of using this technology is that the cost of power generation is reduced and main beneficiary is the end user.

A company official told Business Recorder that in the underground gasification technology coal-mines were not required thus saving huge amount required for setting up power plants. Cougar Energy limited is planning to start the work at Thar Block-III. They had already completed feasibility study on this site some four years back in collaboration with a Dubai based company, the official said.

The company would initially produce 400MW and later the capacity of power generating units would be enhanced to about 1,000MW. Once MoU signed, the company would able to start electricity generation within three to four years.

The official declined to reveal investment layout but said that the spending on this project would be on phases so it was difficult to estimate at the initial stage.

The country is ranked fourth for having the largest coal deposits, which is ideal for power generation declared by several studies but unfortunately for the last 14 years no project could be materialised successfully. But recent efforts taken by both federal and provincial governments have attracted several foreign and local companies, sources in Sindh Coal Authority said.

They said that coal deposits at the Thar desert is 175 billion tonnes followed by Lakhra 1.32 billion tonnes, Sonda-Jherruk 7.112 billion tonnes, Metting-Thatta 0.161 billion tonnes and Badin 0.061 billion tonnes. The Thar coalfield extends over an area of 9,000 sqkm out of which 356 sqkm has been studied in detail by the Geological Survey of Pakistan, proving nine billion tonnes coal in four blocks.

http://www.brecorder.com/index.php?id=568520&currPageNo=2&query=&search=&term=&supDate=

 

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Financial sector attracting heavy foreign investment

FAISALABAD (May 25 2007): Financial sector is currently attracting heavy foreign investment and is among the top three sectors with respect to foreign inflows, which are Telecommunications - $1.2 billion, Financial Business - $572.8 million, Oil & Gas Explorations - $352.7 million during July-February FY07, said official sources.

According to official sources, existing foreign banks have by and large enhanced their presence and stake in Pakistan along with new foreign banks that have entered the domestic market for the first time. For example, Standard Chartered Bank has acquired Union Bank, ABN-Amro has acquired Prime Bank, Tamasek of Singapore has established NIB Bank. There are other transactions, which are in the pipeline and reflect the robustness and profitability of banking sector in Pakistan.

The increasing investment and build up of foreign stake in financial sector is also a manifestation of the investors' confidence in government of Pakistan's determination to build a sound financial system as an engine of growth for the economy.

Foreign portfolio investment in the local bourses has also shown an upward trend signifying an increasing foreign interest in the country's capital markets. Foreign portfolio investment, as represented by the Special Convertible Rupee Account (SCRA) shows a net inflow of US $104 million in January 2007 alone; an inflow of US $23 million was recorded on just one day ie 31st January 2007. Interest exhibited by foreign companies in buying stakes in local companies has also been very well received by the market through the country's privatisation programme.

The government completed eight privatisation worth Rs 196.2 billion during fiscal year 2005-06. The privatisation programme for the current fiscal year is also on track.

One way of achieving better financial institutions is by means of availing the opportunities offered by globalisation. Liberalisation of the financial sector of Pakistan has enabled the domestic sector to take advantage of global opportunities.

According to official sources, financial globalisation in Pakistan has led to increase liquidity and lowered the cost of capital, thus leading to better allocation of financial resources and more productive investments. It has also spurred competition and led to a new age of financial sector development by improving screening of credit risks, monitoring of borrower activities, diversification of the financial portfolio and substantially increasing the outreach to the customers. Foreign financial institutions have also brought about improvements in the system by bringing in highly diversified financial tools and best practices from the developed economies.

This enhanced financial development as a result of financial globalisation is going to play a key role in meeting the growing demand of a nation blessed with unparalleled demographic dividend. The increase in available funding will realise huge investments in infrastructure, corporate sectors, household financing and SME and micro financing. This, in turn will lead to huge employment generation that is a prerequisite for realising the unparalleled demographic dividend.

Despite these positive results, official sources mentioned that Pakistan can not afford to be complacent. Second generation reforms need to be built on past accomplishments in order to utilise the financial sector's resources to achieve a healthy level of economic growth and alleviate poverty. With an average credit growth of 30 percent over the last three years, and the rapid diversification of banks' loan portfolios, there is need for vigilance in the future.

Official sources mentioned that the government intends to play the role of a regulator and facilitator in the financial sector. It is intended to sustain the momentum of reforms so far achieved through maintenance of the growth-enabling environment.

Keeping in view the importance of financial deepening for economic development, Pakistan's medium term financial sector strategy will focus on the following areas during next five years:

-- Broadening access to middle and lower income groups.

-- Development of new liability products to utilise savings of small savers.

-- Corporate restructuring to support financial sector reforms.

-- Infrastructure financing.

-- E-banking.

-- Private equity, pension and provident funds.

-- Investment banking.

-- Human resource development and capacity building.

-- Promotion of Islamic banking.

-- Further consolidation and restructuring of the banking sector.

-- Focus on development finance to serve the under served markets.

-- Further strengthening of supervisory regime & strengthening risk management.

http://www.brecorder.com/index.php?id=568538&currPageNo=1&query=&search=&term=&supDate=