Pakistan Economy - News & Updates - Archive

[dr.umer]

Pakistan's forex reserves drop to $8.1b ​

MENAFN - 05/10/2008

(MENAFN) A report issued by the State Bank of Pakistan showed that the country's foreign reserve crisis has deepened further last month as the bank's net foreign reserves fell to around $8.1 billion against $8.8 billion, DPA reported.

The report indicated that out of the $8.1 billion, around $4.68 billion are the central bank's own reserves while the rest are deposits of private financial institutions.

In September, the Asian Development Bank approved a tranche of $500 million to Pakistan for balance of payments support but it hasn't arrived yet.

The plunge in reserves from over $16 billion just nine months ago brought the country's ratings to negative among the leading credit rating agencies such as Moody and Standard & Poor. Both agencies expect Pakistan is close to defaulting on its commitments of external loan repayments.

 

[Kumar]

Pakistan's forex reserves drop to $8.1b ​

MENAFN - 05/10/2008

(MENAFN) A report issued by the State Bank of Pakistan showed that the country's foreign reserve crisis has deepened further last month as the bank's net foreign reserves fell to around $8.1 billion against $8.8 billion, DPA reported.

The report indicated that out of the $8.1 billion, around $4.68 billion are the central bank's own reserves while the rest are deposits of private financial institutions.

In September, the Asian Development Bank approved a tranche of $500 million to Pakistan for balance of payments support but it hasn't arrived yet.

The plunge in reserves from over $16 billion just nine months ago brought the country's ratings to negative among the leading credit rating agencies such as Moody and Standard & Poor. Both agencies expect Pakistan is close to defaulting on its commitments of external loan repayments.

Pakistan will have to do something seriously now. Coz $8.1B is not enough to make the payments and exp for more than 2 months.
I think that is the reason Pakistan President is asking for 100$ to run the country.

 

[dr.umer]

Wireless Local Loop WLL outpace PTCL's fixed line teledensity ​

5 Oct 2008

Wireless Local Loop (WLL) subscribers have been growing fast in Pakistan, while fixed-line teledensity was dwindling, according to the telecom indicators of Pakistan Telecommunication Authority (PTA). The PTA statistics showed that WLL subscribers of all the five major operators had been adding the number of users to their network.

The WLL subscribers of Pakistan Telecommunication Company Limited (PTCL) have increased from 1,126,585 million in July to 1,139,399 million in August, followed by Telecracd from 523,773 million to 534,809 million, WorldCall from 500,159 million to 509,606 million, Great Bear from 47,214 to 43,847 and Buraq from 388 to 400. The total number of WLL subscribers has increased from 2,224,128 in July 2008 to 2,251947 in August.

The PTA telecom indicators showed a declining trend in fixed line subscribers with going down from 4,086,206 million subscribers in 2007 to 4,546,443 million in the first two months of 2008. The PTCL fixed-line subscribers have declined from 5,128,442 million in 2006 to 4,405,161 million in August 2008. However, the subscribers of other fixed-line operators WorldCall, NTC, Brain Limited and Union Communication have increased during the current fiscal.

The fixed-line subscribers of NTC have increased from 99,665 million in 2007 to 103,059 million during the period under review of ongoing fiscal. The subscribers of Brian Limited have gone up from 6,089 in 2007 to 7,376 in the first two months of 2008. The subscribers of World Call and Union Communication have increased from 10,748 and 2500 in 2007 to 11,347 and 3,500 respectively in August 2008.

The fixed-line users of Naya Tel have increased from 11,000 in 2007 to 16,000 in 2008. The data showed that fixed-line teledensity dwindled to 2.80 in 2008. The PTA's quarterly telecom review also pointed that fixed-line teledensity in the country was on decline with the PTCL losing its fixed lines users.

The review revealed that the dropout started from 2006 when the PTCL fixed-line subscribers were 5,128,442, but declined to 4,405,161 in 2008. The telecom experts say that the fixed-line users have been declining because of increase in WLL and mobile users, besides decline in the PTCL service.

 

[Neo]

Forex reserves drop $688m in one week ​

Sunday, October 05, 2008

KARACHI: Escalating payments for oil and other import products swallowed another chunk of $688 million from the country’s foreign exchange reserves during the last one week, putting the rupee under tremendous pressure.

In spite of financial and economic problems faced by the country, the unbridled and non-stop imports have further widened the trade and fiscal deficits.

The State Bank of Pakistan (SBP) said the country’s foreign reserves fell to $8.136 billion on September 27 compared to $8.824 billion a week before on September 20. The central bank’s own reserves dropped by $721.2 million to $4.686 billion. Contrary to this, foreign reserves held by commercial banks rose by $33.5 million to $3.450 billion.

Forex dealers said panic buying of dollars by banks caused a rise in their foreign reserves amid high demand from customers, which brought heavy pressure on the rupee. The speculative buying of dollars by banks led to a depreciation of the rupee, which touched a record low on Saturday at Rs78.50 in the inter-bank market.

“In the prevailing situation, there is no scope of an improvement in foreign exchange reserves which may further deteriorate macroeconomic indicators,” an economist commented.

A currency dealer said: “Although some foreign lending institutions have agreed to provide financial assistance for Pakistan and the Asian Development Bank has released $500 million, it will take time to rebuild liquid reserves.”

Pakistan’s total liquid foreign exchange reserves stood at its highest level of $16.078 billion in September 2007. Of that figure, the reserves held by the central bank were over $13.804 billion and those by commercial banks at $2.275 billion.

However, in a short span of one year due to sky-high oil prices in the international market and excessive reliance on imported commodities, almost 50 per cent of foreign reserves were washed away. On the other hand, the pace of foreign inflows has not been commensurate with the fast depleting reserves.

 

[Neo]

Telecom companies make billions as customers suffer ​

Sunday, October 05, 2008

KARACHI: Telecommunication companies in Pakistan made billions during the three days of Eid-ul-Fitr while choked service lines caused trouble to people with their calls and SMS, leading to deduction in balances without satisfactory communications.

As Muslims in the country wished each other through phone calls and SMS for the arrival of the month of Shawwal, many around the nation complained that they faced troubles such as repeated disconnection of phone calls, disruption in line or failure to send messages successfully.

The subscribers of various local cellular service providers and landline packages said that they had their balances deducted from their phones despite failing to make a connection with the required destination. The worst hit ones were those who tried to make international calls and had their balances subtracted without succeeding and those who had sent bulk messages and failed to receive the delivered report to even one sent message.

Shahzad Anwer, a subscriber of Warid, said that he does not subscribe to any free SMS package and had loaded a Rs200 card just to send messages. However, he was shocked to find out that none of his friends had received a message from him and he had lost all his balance.

Aliya Matloob, another subscriber of Mobilink said that she had tried calling her parents who live in Dubai to wish them but faced repeated disconnections which made her lose several hundred rupees.

Similarly, Nadeem Akhtar, who arrived in Karachi from the UK, faced trouble in contacting his brothers on the first day of Eid when he waited at the airport for them to receive him and could not get through. He also had his balance deducted from his account.

On the other hand, Pakistan Telecommunications Company Limited (PTCL) made millions of rupees by fleecing subscribers off their money during the three-day Eid-ul-Fitr holiday as they stopped their facility of free phone calls from September 30, and failed to inform their subscribers.

This resulted in subscribers making several calls during the stipulated ‘free call’ time between 11pm to 6am, unaware that the facility had been withdrawn, which is likely to lead towards higher telephone bills for the current month.

Upon contacting PTCL, the company spokesman Ali Kader Gilani informed The News that PTCL had informed the Pakistan Telecommunications Authority of their reversal of the facility through a written notification and also sent out advertisements to various leading newspapers of the country.

He added that a release had also been issued in this regard which clearly stated that the free local call promotion was being discontinued to be replaced with another alternative package. He stressed that PTCL had not cheated its subscribers and had in fact introduced a new weekend package which would come into effect on October 5, and would be offering them further improved and reduced rates.

 

[Neo]

Relief as Pakistan receives $500m from ADB​

Another $500m may be released by June 2009​

Sunday, October 05, 2008

ISLAMABAD: Pakistan’s struggling economy got a sigh of relief by receiving $500 million first tranche out of a total $1.4 billion loan facility from the Asian Development Bank (ADB) under the Accelerating Economic Transformation Programme.

“Yes, we transferred the first tranche of $500 million on September 30 at 9pm into the accounts of the Government of Pakistan,” said a senior ADB official while talking to The News here on Saturday.

The second tranche of $500 million, he said, would be disbursed by June 2009 keeping in view the pace of reforms committed by Pakistan in the energy, agriculture and financial sectors.

“The last tranche of Accelerating Economic Transformation Programme (AETP) worth $400 million will be disbursed by June 2010 on the basis of the performance achieved by the government in certain sectors of the economy,” he added.

The ADB’s Board granted its consent for $500 million loan facility after attaching a Letter of Comfort of the IMF along with the document on the basis of which this amount was approved on September 30.

The ADB attached certain conditions for approving the release of first tranche worth $500 million for Pakistan, under which Islamabad will be bound to eliminate power sector subsidy by June 30, 2009.

The elimination of power sector subsidy means that Islamabad will have to increase power tariff by at least average 30 per cent till June 2009.

The subsidies on fuel will be abolished completely as currently the government is giving subsidy on diesel in the range of Rs5 to Rs8 per liter.

“The ADB and Pakistan also agreed under Pak Accelerating Economic Transformation Programme to resolve the issue of circular debt in the power sector by October 2010,” the official sources quoted attached conditions of the ADB.

Pakistan also agreed to fully implement targeted safety nets programme till 2010 by improving network and coverage of Benazir Income Support Programme and other safety net programmes.

“The PPP government also agreed to come with Structural Transformation Strategy and Action Plan to be adopted by the federal cabinet by 2010,” added the official. Pakistan and ADB also plan to come up with auto industry development plan under this programme. Islamabad will also take measures to put in place risk based custom inspection and e-filing of Sales Tax and Customs.

The financial sector regulations will be strengthened by the State Bank of Pakistan under the approved amount programme of the ADB. “The Anti Money Laundering bill will also be approved,” said sources.

The wheat support price has also been increased in accordance with the ADB’s programme. The issue price of wheat will be around 90 per cent of the market price at that time.

The ADB loan will support ongoing changes in the energy and agriculture sectors, and will help lay the foundation for a radical transformation of the economy by diversifying, deepening and expanding a competitive industrial sector, and creating much-needed jobs for Pakistan’s young and growing labour force.

 

[Neo]

Pakistan spearheads launching of regional space body ​

Sunday, October 05, 2008

ISLAMABAD: On the pattern of European Space Agency, Pakistan is planning to set up Asia-Pacific Space Cooperation Organisation (APSCO) in collaboration with China aimed at making regional countries self-sufficient in the field of space Technology.

The organisation is likely to start functioning by end of this year or in next year, Secretary Pakistan Space and Upper Atmosphere Research Commission (Suparco) Air Commodore Arshad Hussain Siraj told PTV on Saturday.

Pakistan is founding member of APSCO, while China being time-tested and all-weather friend of Pakistan is contributing ‘major support’ in setting up of such an organisation, he added.

World Space Week is being observed from October 4 to 12 to create awareness among masses about importance of space and its related education for the contemporary world.

The space week is celebrated across the world because first space shuttle was launched on October 4, 1957.

Air Commodore Siraj said Suparco was working on a National Satellite Development Programme under which projects like communication satellite, remote sensing satellite, satellite launching vehicle and human resource development would be completed.

Presently, he said Pakistan had a leased satellite PAKSAT-1, which would hopefully be replaced with state-of-the-art technology PAKSAT-1R in 2011. It would be a communication satellite, he mentioned.

 

[Neo]

Govt to initiate new power distribution scheme worth Rs 3bn​

ISLAMABAD: To meet sever power shortfall and continuous load shedding, the government is initiating several power generation/distribution scheme through utilisation of internal and external resources.

For increasing power generation capacity, the government is planning ‘Power distribution enhancement project Phase-I’ scheme with a cost of Rs 3.005 billion with Rs 240 million as foreign exchange component (FEC).

Pakistan Electric Power Company (PEPCO) will be the sponsoring agency and the executing agency is PESCO. The project will be partly funded by Asian Development Bank’s loan and partly by Peshawar Electric Supply Company (PESCO) own resources. The expected time for completion of project is 30 months.

It would help in extension of existing 132KV grid stations and augmentation of transformer capacity at various locations. Under this project, the installation of capacitors within switchyard of the grid stations and on 11KV feeders will be completed. The scheme would help in the completion of Distribution of Power (DoP), which includes new 11KV feeders and installation of distribution transformers for accommodating new rural/urban customers. The project would help the government to initiate Energy Loss Reduction (ELR) programme of existing feeders.

Official in the Planning Commission told Daily that the project was discussed in the Central Development Working Party (CDWP) meeting. PEPCO earlier submitted an umbrella PC-I containing the components of STG, ELR and DoP for all DISCOs therefore, it was decided in the meeting that ‘respective DISCO’s should prepare separate projects/ PC-I’s containing the component of STG, ELR and DoP and submit to the commission for approval.’

The government has already allocated Rs 804 million for all DISCOs in the Public Sector Development Programme (PSDP) 2008-09. The existing power generation capacity is not sufficient to meet the ever-increasing demand of the country. In the recent years, as economic activity picked up in Pakistan, there is a supply and demand gap in the existing system (more than 4000MW power deficit recorded in May 2008).

For additional power generation requirement, emphasis is laid on the development of indigenous resources i.e. hydro, renewable, coal, natural gas and nuclear. The power sector requires immediate enhancement in capacity to meet the economic growth targets. Electricity demand is expected to grow by around 10 percent per annum during the coming years. To cope with this high growth in demand, it is estimated that Pakistan would require about 2000MW additional capacity annually, which would need to be distributed through transmission and distribution network. Consequently, enhancement in the capacity of PESCO’s system is urgently required. The proposed scheme will help to meet the requirement of over all distribution system efficiency and stability to deliver reliable power to their customers.

At present, numbers of power generation projects are under implementation stages through public and private sector. A total of 1689MW of power is expected to be available by the end of 2008. Out of which 1217MW of thermal power projects are under process by the public sector (150MW at Faisalabad, 100MW at Guddu, 192MW at Multan, 150MW at Sialkot, 200MW rehabilitation of existing GENCO’s and 425MW of Rental power generation) and hydropower project of Satpara (16MW). In private sector, 375MW of thermal (150MW of Attock Gen Ltd and 225MW of orient thermal power) and 81MW of hydro power (Malakand-III). The detailed engineering of Diamer-Basha Dam Project has recently been completed and its construction is expected to start by mid 2009. In addition, a number of projects for extension and augmentation of existing grid station have also bee initiated by NTDC.

 

[Neo]

Iran to reduce Pakistan’s gas if Indian supplies suspended​

ISLAMABAD: Iran has proposed a reduction in Pakistan’s gas supply if supply to India is wilfully disrupted.

Official sources in Islamabad told Daily Times on Saturday that the ECC of the cabinet’s Sub-Committee on Gas Import Projects has been informed that Iran has proposed to include the new clause to the proposed Gas Sale Purchase Agreement of the Iran-Pakistan-India gas pipeline project. If the supply of gas to India is wilfully disrupted by Pakistan, Iran shall have the right to reduce Pakistan’s gas supply in the same proportion.

The sources said the committee had decided that the proposed change could be agreed on if a clause ensuring Pakistan most favoured nation status is also included.

 

[SmashJ]

Pakistan plans to sell valuable energy assets, beginning with a major gas field, as it tries to reap billions of dollars from deals with investors in industries like banking and farming.

 

[SmashJ]

Pakistan plans to sell valuable energy assets, beginning with a major gas field, as it tries to reap billions of dollars from deals with investors in industries like banking and farming.

http://www.nytimes.com/2008/09/09/b...nture.html?partner=permalink&exprod=permalink

 

[SmashJ]

In addition to my previous post.

 

[Neo]

Pakistan seeks Chinese investment in cement sector​

ISLAMABAD (October 05 2008): In a major move to encourage Chinese investment, Pakistan has approached the Chinese firms to encourage investment in the cement sector by establishing new plants in the country. Sources told Business Recorder on Saturday that the issue of new Chinese investment in Pakistan and progress of existing Chinese projects was discussed in a recent meeting between Chinese Ambassador in Pakistan Luo Zhao Hui and senior officials of different ministries at the Planning Commission.

The meeting thoroughly reviewed all Chinese projects in Pakistan, which was attended by the senior officials of the Planning Commission, Federal Bureau of Revenue (FBR), Finance Division, Ministry of Petroleum, Board of Investment (BoI), Ministry of Railways and Ministry of Foreign Affairs. According to sources, the government has invited Chinese firms to express interest in the establishment of the cement plants in Pakistan. The idea is to ensure maximum investment in potential sectors, particularly cement industry.

The duties and tax concessions on the import of plant, machinery and equipment under different FBR notifications and tax laws are available to the new foreign investors. The procedure of "advance ruling" under Income Tax Ordinance 2001 is also available for new investors to know about their income tax liability in advance before making any investment in Pakistan.

During the meeting, the Chinese Ambassador informed the Pakistani government that during the visit of President Asif Ali Zardari to China, a memorandum of understanding (MoU) on sharing of knowledge between Chinese and Pakistani Planning Commissions might be signed.

The agreement would be instrumental in strengthening long-term relationship between the two countries. The Chinese Ambassador also thanked the government of Pakistan for supporting expeditious planning and implementation of projects being executed by the Chinese companies.

Sources said that the meeting was informed that the Cabinet on September 23 2008 approved the grant of long distance license to Pak-China Mobile Company. According to sources, the meeting was also informed that the ECC of the Cabinet on September 22 approved the award of specific contracts by ERRA to the Chinese companies at the agreed rate of 25 percent of the projects' costs being funded through the Chinese Preferential Buyer's Credit (PBC) loan of around 300 million dollars.

The meeting also discussed that the significant progress has been achieved in the removal of 132 KV line and its pylons from the plot for Pak-China Friendship Centre in Islamabad, and the removal would be completed by end of current month. Revised PC-I, incorporating the demand for additional vehicles, has been approved by the Central Development Working Party (CDWP).

The land for the Pak-China Friendship Centre at Beijing has been identified. About the extension of the exploration license for Baska Block, the meeting was informed that the Ministry of Petroleum had issued extension of one year to the relevant Chinese firm.

As far as Duddar lead-zinc project is concerned, 60 kilometres of road out of a total of 106 kilometre has been completed and the balance work is being completed on fast track basis. The meeting was informed that Sichan Electric Power Company of China had completed the work on 500 KV substations at Lahore, however, due to some defects in the relay equipment, the taking over of the substation was delayed. The equipment is expected to be ready within three weeks after which the substation would be taken over for the final testing.

The Rawat substation is also ready, however, its testing would be conducted during October 10-15 and would subsequently be taken over once it qualifies the testing. The government also asked the Ministry of Petroleum and Natural Resources to take necessary steps to avoid delays in initiation of Qadirpur gas compression station project. Similarly, Sinocoal of China and Engro have planned to set up a joint venture to participate in the Thar Coalfield Block-2 and Mining and Power Generation Project.

The meeting was informed that MCC of China had shown interest in acquiring the Reqdiq project. However, the project has already been awarded to a Chilean and Canadian firm, which have invested by now 20 million dollars and are in the process of converting their licenses into lease.

The government of Balochistan has equity in the project. The MCC could join in some other forthcoming projects in the vicinity. About selling of shares of Pakistan Steel Mills, it was stated that the government was in the process of segregating the core and non-core businesses of Pakistan Steel Mills. Once the job was completed, decision on selling of the shares would be taken subsequently, the sources said.

Sources said that the Pakistan Railways had recently awarded two tenders - signalling and replacement of locos - to Chinese companies. About the Pak-China Haier Ruba Industrial Zone, the issue of land has been resolved and it has been decided that the cost of the land will be jointly borne by the Federal government and the government of Punjab.

Sources said that the Pakistan was committed to provide Rs 18 billion for the Pak-China Higher Education University. This funding would be available in addition to the Higher Education Commission (HEC) present Public Sector Development Programme (PSDP) allocation for establishment of the university during the next eight years. The HEC has been asked to start the courses in the campus of COMSATS and continue it there for next two years till a final decision is taken to establish and build a new campus.

The Chinese Ambassador expressed his concerns over non-starting of the session, since the Chinese faculty had already arrived Pakistan at the cost their jobs back in China. The relevant Pakistani authorities assured the Chinese envoys that the session would start as agreed with their counterparts.

The meeting also discussed other projects of Chinese investors in Pakistan. The satellite project with Chinese has been approved at the highest level, and the government of Pakistan is waiting the pricing, incentives and technical details from the Chinese side.

The Chinese side was requested to plan funds for the construction of Diamer Bhasha Dam. Recently, Rs 116 billion was approved for acquisition of land for the project. The Chinese side expressed its willingness to consider the funding for the dam. The meeting also discussed the issue pertaining to new location for Chinese Embassy in Pakistan.

The Chinese Ambassador said that the Capital Development Authority (CDA) was asking for some additional funding for the land reserved for new Chinese Embassy, which, in their opinion, was not a fair charge. The relevant authorities the ambassador assured that the matter would soon be resolved once the CDA Chairman was back in town. He asked the Chinese side to provide the price differential. The Chinese side agreed to provide the information for speedy establishment of new Chinese Embassy in Pakistan.

 

[Neo]

World Bank to provide $50 million to Pakistan for poverty reduction​

FAISALABAD (October 05 2008): World Bank will provide $50 million to Pakistan for launching "Pakistan Social Protection Project" to reduce poverty and inequality and promote human capital investments among the poor families through the provision of direct monetary transfers and incentives.

Integrated Safeguards Data Sheet of World Bank revealed that WB and IDA assistance under the proposed project would aim to contribute to these ultimate objectives of poverty reduction and human capital development among poor families.

The objective of the proposed project is to strengthen the ability of the FSP and CSP programmes to play an effective role in the country strategy to reduce poverty and inequality and to foster investments in human capital, as well as to assist the Pakistan in the development of a minimum package of social care services for the poor structured around these programmes.

Pakistan Social Protection Project proposes to support the Government of Pakistan (op) in the development and implementation of a minimum assistance package targeted to poor households with the objective of increasing the effectiveness of social protection interventions in Pakistan in terms of both poverty alleviation and promotion of human capital accumulation.

Recent economic growth has significantly contributed to poverty reduction in Pakistan, with the poverty rate declining from 34 to about 28 percent between 2000-2001 and 2004-2005 (the latest available data). This improvement could be felt both in urban and rural areas, as well as across all four provinces.

Specifically, WB report said that under Phase-1 of the project would support the effective strengthening and implementation of the Food Support Program (FSP) and Child Support Program (CSP) programs and of a minimum package of social care services.

EFFECTIVENESS WOULD BE ASSESSED IN TERMS OF:

(I) the targeting, coverage, and adequacy of the benefits/services;

(ii) efficacy of the CSP conditionalities (co-responsibilities) to foster investment by beneficiary families in human capital; and (iii) the capacities of involved institutions (including ministries, program staff, service providers, and beneficiary groups) to manage these programs efficiently, to monitor results, and to (begin to) evaluate impacts.

Under Phase-2 of the Project would consolidate and deepen the reforms, further perfecting the design of the programmes based on experience under phase-1.

Such second generation reforms might include measures to enable scaling up/down depending on country conditions, further strengthening of M&E, additional administrative efficiency gains, possible development of complementary social protection instruments/services for poor people who are highly vulnerable but do not have children (and thus are not eligible for the co-responsibility requirements of the CSP); and development of mechanisms to enhance prospects for self-sufficiency of poor families.

Achievement of these goals and the ability to monitor them adequately will be evidence of improvement in the institutional framework and capacities for the program. Progress towards the ultimate objectives of poverty reduction and human capital accumulation will be difficult to assess and to attribute to the program during the project life span with statistical rigor.

Nonetheless, the project will include both baseline and follow-up work to evaluate program impact on educational performance, in addition to building upon the results of the first phase of the impact evaluation of the CSP pilot.

To achieve the objective of "Pakistan Social Protection Project", WB stated that the project will include activities aimed at reaching the very poor (ie, the poorest 10-15 percent of the population), designing and implementing a minimum assistance package for this group, and, more generally, strengthening the overall capacity of the government for the effective provision and implementation of social protection.

IN PARTICULAR THE PROJECT WILL BE STRUCTURED AROUND THREE COMPONENTS:

A. Design and implementation of an effective targeting mechanism for social protection interventions. The project will provide technical and financial support for the development of a targeting instrument for the FSP and CSP programmes, as well as other social programmes. Activities under this component will include:

(I) Technical assistance to the design of targeting tool;

(ii) Technical validation, including discussions with government representatives and others as well as piloting of new instrument;

(iii) Implementation.

B. Design and implementation of a minimum assistance package for the very poor, with a focus on cash transfers and social care services. With respect to cash transfers, the project will support ongoing reform efforts within PBM, including the strengthening of the FSP and the implementation of the CSP. With respect to social care services, the project will support innovations in delivery models in order to increase effectiveness and impact and to promote complementarities between such services and cash transfers. Activities under this component will include:

(iv) Development of effective mechanisms in PBM for program management, including, entry (enrollment) and exit, monitoring of conditionalities under CSP, and benefit payment;

(v) Design and implementation of innovation fund or similar mechanism for the delivery of social services to poor households;

(vi) Development of a communications and social accountability strategy to improve beneficiaries understanding about rights and responsibilities under various programs, and their capacities to hold service institutions accountable.

C. Institutional capacity building. The project will support activities aimed at strengthening supervision and implementation capacity at the federal, provincial and district levels, as well as at articulating policy making across these three levels of government around the National Social Protection Strategy.

The team is currently considering the potential inclusion of a fourth component that would directly finance both cash transfers and social care services on a performance-based manner. The team would like to receive management guidance on this issue, however, prior to any discussions with the Pakistan. The main rationale for the inclusion of such component would be to strengthen the alignment of incentives between the Ministry of Finance and the MoSWSE regarding project and programme implementation.

 

[Neo]

GDP growth mainly depends on sound agriculture sector​

ARTICLE (October 05 2008): The gross domestic product (GDP) is one of the primary indicators used to gauge the health of a country's economy. It represents the total value of all goods and services produced over a specific time period. Our country lies on No 47 in world list of GDP prepared by International Monetary fund for the year 2007.

Agriculture sector is the sustenance of our country's economy. It contributes around 21% to the GDP, employees 44% of labour force and contributes to 68% of foreign exchange earning through export of raw material, semi processed and processed agriculture products. Sector wise contribution towards formation of GDP and its growth over the last five years is shown in table and chart. Data extracted from SBP website.

=========================================================================================================================
YEARS
=========================================================================================================================
SECTOR 2002-2003 2003-2004 2003-2004 2004-2005 2004-2005 2005-2006 2005-2006 2006-2007 2006-2007
% % % %
=========================================================================================================================
Agriculture 941,942 964,853 2.43 1,027,403 6.48 1,043,587 1.58 1,095,673 4.99
Industry 926,183 1,076,808 16.26 1,207,268 12.12 1,267,413 4.98 1,353,554 6.80
Services 2,053,979 2,173,947 5.84 2,358,559 8.49 2,585,736 9.63 2,791,494 7.96
TOTAL 3,922,104 4,215,608 7.48 4,593,230 8.96 4,896,736 6.61 5,240,721 7.02
=========================================================================================================================

Around 70% of our population lives in rural areas and their livelihood depends on agriculture and its allied economic activities. We have observed uncertain growth and overall decline against the targeted growth in this sector over the period of the last five years. Nowadays, we are facing its impact in shape of scarcity of food items and unprecedented hike in their prices.

Overall industrial growth has also declined due to increase in cost of production ie cost of raw material, fuel/power and of capital. Most of our manufacturing units have become incompatible in local as well as in export market.

China's products due to its cost compatibility, are replacing our domestic product and our manufacturing units cost is also increasing on account of small scale production. In the context of implementation of WTO a great stress is being forecast on our manufacturing sectors.

There is extreme need to make efforts to bring down the cost of fuel/power and capital on war footing basis to bring this sector in a viable position. Over the last five years service sector has performed very well. In case of prolonging of the present socio-economic and political situation its growth seems to be affected in the future as it is again linked with the health of overall economy of the country.

Our agriculture sector has great potential for sustainable and higher growth of GDP in Pakistan as we have space for horizontal as well as vertical expansion of this sector. The vertical growth potential can be assessed from the data given below in table No 2, derived from the website of Ministry of Agriculture of Pakistan and Food Agriculture Organisation of UNO.

=======================================================================
YIELD COMPARISON
=======================================================================
Products National Progressive National Average
=======================================================================
Average Growers Yield Yield Developed
Yield Pakistan Pakistan countries
(Tons/Hector) (Tons/Hectors) (Tons/Hector
=======================================================================
WHEAT 2.51 5.5 7.20 (Germany)
4.00 (Australia)
2.82 (USA)
4.45 (China)
-----------------------------------------------------------------------
COTTON LINT 0.704 1.45 1.86 (Australia)
1.24 (China)
0.80 (USA)
-----------------------------------------------------------------------
SUGAR 49.22 110 91.97 (Australia)
73.82 (USA)
82.52 (China)
-----------------------------------------------------------------------
RICE PADDY 3.16 7.30 6.30 (Australia)
7.70 (USA)
6.26 (China)
-----------------------------------------------------------------------
POTATOES 13.34 25.00 34.41 (Australia)
43.66 (USA)
14.35 (China)
-----------------------------------------------------------------------
ONION DRY 13.82 N/A 42.88 (Australia)
51.18 (USA)
20.61 (China)
-----------------------------------------------------------------------
APPLES 3.12 N/A 13.82 (Australia)
29.80 (USA)
13.71 (China)
=======================================================================
It undoubtedly shows that there is great potential for vertical expansion in agriculture sector as our progressive farmer is taking a yield of more than double of our national average yield. Further, nation-wide average yield of developed countries is more than our progressive farmer's yield, which shows a gap between national average yields of our country and the developed countries yield. It is high time that our government and other regulatory and facilitating departments relating to this sector should sit together and formulate laws and policies in consultation with all stakeholders for the development of this sector that our national average yield come up to the level of national average yield of developed countries. In the first step our national average yield be brought to the level of our progressive farmers yield within a span of five to eight years.

Similarly other allied activity to agriculture sector like dairies/livestock, fisheries, forestry and horticultures also need to be promoted through advanced technology that may meet international standard for enhancing their exports. Our country has great potential to increase production of these products to meet domestic demands as well as exports.

At the same time we must also take drastic steps for establishing of food processing and packaging industries of international high quality and standards for increased demand of our products abroad. At present our financial institutions paying no attention to provide credit facility to farmers as they feel insecure due to lack of legislation in this sector and the State Bank of Pakistan is not performing its regulatory role effectively for utilising available funds with the financial institutions.

SBP should devise such regulatory measures for investment portfolio of financial institution that could reduce artificial demands, may enhance productivity, increase GDP with the stabilisation of all other economic sectors. Investment portfolio of financial institutions, data taken from website of SBP for April 2008 is depicted in this chart.

It is very strange that the sector which is contributing 21% to GDP, employing 44% of labour force and having potential to increase production and exports more than double, is highly neglected by the financial institutions of our country by providing only 3.7% of credit/loaning to this sector. On other side massive loaning to Government of Pakistan, consumer financing, NBFC is questionable. It creates artificial demand and speculation, adds nothing to real productivity and growth of economy.

I am very much optimistic that our agriculture sector can play a vital role in sustainable and higher growth of GDP, provided government and other regulatory/facilitating bodies like SBP, SECP, FBR, Financial Institutions and agriculture extension and research department play their role for the development of this sector.