KARACHI: Pakistans current account deficit widened to $3.952 billion in the first quarter of fiscal year 2008/09 (July-September), compared with $2.271 billion in the same period last year, the central bank said on Friday. This is equvilant to 2.4 percent of the gross domestic product, analysts said.
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KARACHI: Pakistans current account deficit widened to $3.952 billion in the first quarter of fiscal year 2008/09 (July-September), compared with $2.271 billion in the same period last year, the central bank said on Friday. This is equvilant to 2.4 percent of the gross domestic product, analysts said.
KARACHI (October 18 2008): The country's current account deficit widened by 74 percent to 3.9 billion dollars during the first quarter of the current fiscal year mainly due to slow foreign inflows and rising imports. Official statistics on Friday revealed that during the July-September of FY09, the country faced current account deficit of 3.952 billion dollars against 2.271 billion dollars during the corresponding period of FY08, depicting an increase of 1.681 billion dollars in first quarter of 2009.
Economists said that rising current account deficit is a major challenge for the economic managers and high current deficit would cast further negative impact on foreign exchange reserves and the economy.
They said that the country's economy is already facing grim situation for last one year and the government has failed to take corrective measures. a"Increasing trade deficit followed by slow growth in exports and high imports are chief reasons of this increase in current account deficit," they added.
The State Bank of Pakistan statistics also indicated that principal factors responsible for the widening of current account deficit include a widening trade deficit, which surged by 84 percent to 4.366 billion dollars during the first quarter of FY09 against 2.369 billion dollars during the same period of FY08.
Services deficit registered a negative growth as it declined by 22 percent to 1.238 billion dollars in July-September of FY09 as compared to 1.594 billion dollars in corresponding period of FY08.
Similarly, income deficit has also witnessed a slight increase of 15 percent or 147 million dollars to 1.099 billion dollars from 952 million dollars. During the first three months, the country's overall income from abroad stood at 253 million dollars as compared to payments of 1352 million dollars to the overseas partners.
While, overall deficit including trade, services and income stood at 6.703 billion dollars against the current account transfers of 2.775 billion dollars in first quarter of FY09. Statistics show current account deficit without official transfers climbed to 4.046 billion dollars during the first three months of FY09 as compared to some 2.285 billion dollars during the same period of FY08.
ISLAMABAD (October 18 2008): Azerbaijan has shown interest to export electricity via Iran to Pakistan and to invest in the water and power sectors. According to a statement, the Ambassador of Azerbaijan, Dr Enyullah Madatli called on Federal Minister for Water and Power, Raja Pervez Ashraf here on Friday and discussed matters of mutual interest and bilateral relations to further boost economic ties between the two countries.
While welcoming the Envoy, the Minister lauded the idea of providing electricity through Iran to Pakistan. He offered him to make investment in the energy sector and said that this sector has great potential and the foreign companies are getting good returns on their investments.
The Minister said that currently Pakistan was facing many internal and external challenges and energy deficit is also one of them. He informed the envoy that the government was taking necessary measures to generate electricity to bridge the demand and supply gap through fast track projects.
He informed that the government now attaches high priority to exploit the indigenous resources like coal, hydel and wind for power generation. He said that the present government has set up Thar Coal Development Board to generate cheaper energy from Coal. He said the Azerbaijan expertise in hydroelectric power generation will benefit Pakistan and invited the Azeri investors to invest in these sectors.
He assured the envoy that Pakistan government would welcome them to invest and participate in the hydroelectric generation projects in Pakistan. The Minister also stressed the need to explore possibilities of co-operation in other sectors particularly in tourism. He said that both the countries should exchange delegations to promote tourism between the two countries.
The Ambassador also discussed other matters of mutual interest especially investment possibilities in water and power, particularly hydroelectric sectors. The Ambassador said that Azerbaijan has great electricity potential with surplus power and will provide every possible assistance and technical co-operation in this regard, which was appreciated by the Minister. He also expressed the hope that this meeting would further strengthen and enhance the bilateral and economic relations between the two countries.
ISLAMABAD (October 18 2008): Former economic advisors believed that assistance from the International Monetary Fund (IMF), Saudi oil facility and any other financial support by the international community could rescue Pakistan from prevailing economic crisis.
Former top ranking economic managers told Business Recorder on Friday while explaining the current options available for the government to improve the economic situation.
Former Finance Minister, Sartaj Aziz and former Minister of State for Finance, Omer Ayub urged the government to restore the confidence of investors and international community to rescue the economy from being worsened. They showed unanimity on the point that the present economic situation is not favourable for attracting investment and foreign borrowing because of the law and order situation, poor economic policies and international recession.
Aziz suggested that the government should immediately set its priorities and evolve short, medium and long-term strategies in a bid to rescue the unstable economy. 'As a short-term strategy, the government should approach leading international financial institutions, focus on the Saudi Arabian Oil facility and arrange borrowing of 'foreign exchange reserves' of at least $10 billion from any country like China to back up the economy', he added.
Further, he emphasised that availability of Saudi Arabian oil facility may help bringing the country out of the prevailing economic crisis up to a large extent. The former Minister lamented that Pakistan's non-development expenditures are exceeding its development ones. 'As a medium-term strategy, the government should compress import, curtail non-development expenditure and concentrate on the industrial growth as well as achieving the 25million tons target of wheat production set for 2008-09.'
Further, 'If we succeed in achieving oil facility and wheat production target, then our most of the problems concerning squeezed foreign reserves, can be solved to some extent', Aziz said optimistically. He further mentioned that the country's reserves dropped to below $8 billion, which is alarming for the economy. Omer Ayub Khan said that due to the frequent reshuffling of finance ministers and finance secretaries, the system has remained inconsistent and demoralised.
'As a result of this reshuffle, people have shifted their money to other countries and no new investor is ready to come to Pakistan amid uncertainty,' he maintained. He alleged that rulers concentrated on their politics instead of evolving efficient and people's friendly policies under the unstable national and international economic atmosphere.
The former State Minister suggested that the rulers have to regain the confidence of foreign investors willing to invest in Pakistan, motivate donors and stabilise the currency. He defended economic policies of his government, saying that it was not responsible for power crisis and wheat shortage. All this, he said, is the outcome of the mismanagement of the present regime.
Further, Omer was of the opinion that the thermal plants has failed to generate power owing to non-payment of its dues by the government. 'There is no significant change in the population then how the demand of 5000mw has increased all of a sudden whereas the entire power requirement of the country is 7000mw,' he questioned. In addition, the government has to show its seriousness and competency to rescue the economy by formulating effective policies. Otherwise, the situation could turn to a massive economic disaster.
MULTAN (October 18 2008): Pakistan's industrial output has registered a rapid decline during the current fiscal year. According to a report, during the current fiscal year, Pakistan could not achieve its output target, as during the last couple month of this year, it posted a negative trend of growth 4.22 percent.
The declining trend of manufacturing sector began during the last few years, due to inadequate level of investment in the country, especially in the industrial sector. According to the report, in the past, no efforts have been made to enhance the capacity of the industrial sector, which resulted in rapid decline in industrial growth.
On the other hand, increasing trend of cost of production, due to high power tariff, load shedding, gas shut down and worsening law order situation, made it impossible for industrial sector, especially textile and steel sectors, to maintain pace of growth, which plummeted to 8.8 percent.
Referring to the closure of many industries, especially textile and steel, the report pointed that that the flow of money and investment were the major cause of decline industrial production. While the import was rising, the environment of exports was also not encouraging, as the exporters had to face tough competition from their rivals - China, India and Bangladesh.
ISLAMABAD (October 18 2008): A four-member committee has recommended to the Private Power Infrastructure Board (PPIB) to award 960MW Tarbela extension hydro project to Water and Power Development Authority (Wapda).
Sources said the PPIB had constituted the committee comprising PPIB Managing Director, Additional Secretary (CF), the Ministry of Finance, Member (Water) Wapda and Hussain Ahmed Siddiqui (a board member), in its meeting held on September 20, 2008 to deliberate on the issue and present recommendations to it within two weeks.
The committee noted in its report that on the basis of infrastructure and other logistic support, the award of contract to Wapda, which was working on the project for years, can ensure early completion of this key power project and help Pakistan overcome growing electricity shortage.
The committee in its recommendations observed that Wapda was working on the project for last 8 to 10 years and award of contract to it will result in its early completion. It also noted that Tarbela Extension Hydro Power Project is an irrigation project and award of its contact to a private sector party can delay its completion.
Wapda had shown willingness to get Tarbela Extension Power Project contact. Wadpa chairman in a letter had submitted to the PPIB board that instead of handing over the project to M/s Tarbela Hydro Limited and Associate could delay completion of this key project.
The Wapda chairman's letter presented in the PPIB board meeting said: "Tarbela dam project in of key importance for national economy, which demands its development in the public sector by Wapda." The board was informed that in pursuance of its decision taken in 72nd meeting, the PPIB had issued notification of pre-qualification to M/s Tarbela Hydro Limited and Associates on November 8, 2007 and asked for performance guarantee (PG) within one month.
In response the sponsors (M/s Tarbela Hydro Limited and Associates) submitted PG with a request to incorporate a special clause in the Letter of Intent (LoI) regarding reimbursement of the feasibility study cost, in case the project is discarded by GoP after approval of the feasibility study.
The board was briefed about the provisions of 2002 Power Policy regarding hydel projects and reimbursement mechanism for cost of feasibility studies to sponsors in case or failure of tariff negotiations with the power purchaser.
It was highlighted that the project is under process for the last couple of years and it was being awarded to the private sector with explicit agreement and consent of Wapda. Non-award of project to private sector at later stage may have serious repercussions for GoP initiative to attract investment from private sector. The members stressed the need to thoroughly deliberate the implications of non-issuance of LoI after submission of PG by the sponsors.
FAISALABAD (October 18 2008): World Bank will provide technical assistance Credit of approximately $26 million for Sindh Coal Technical Assistance Project (SCTAP), while Pakistan Government would arrange $6 million for this project.
In a project report, Michael Stanley, Lead Mining Specialist Oil, Gas, Mining and Chemicals Department of World Bank said that this Project will help the Governments of Sindh and Pakistan strengthen the enabling policy, legal, and regulatory frameworks conducive to new investments in the coal-to-energy sector; and to assist the Governments of Sindh and Pakistan to attract qualified private investors to develop Thar coal deposits and build new capacity for coal thermal power generation, guided by high standards of environmental and social sustainability.
The Project will also ensure that the coal-to-power sector development responds to the needs of Pakistan's long-term energy strategy. Expected Project outcomes would be: (i) various policy, legal and regulatory instruments, consistent with international good practice, used by the Governments of Sindh and Pakistan in developing coal-to-power sector; and (ii) bidding and negotiations leading to financial close on new investment into at least one coal mine and at least one independent power producer (IPP) in Thar, he added.
Commenting on the first Component, WB expert Michael Stanley said that this component Provide policy, legal and regulatory advisory services to key government agencies and other counterparts in order to facilitate coal-to-power sector development, including ancillary infrastructure development, and complete the transaction for a selected Thar coal block.
To this end the project will assist in developing the coal sector policy and the coal development road-map in line with Pakistan's long-term energy strategy, updating applicable laws and regulations (including those related to mineral licensing and tendering procedures), and setting up operational environmental and social management framework for coal-to-power sector. The project will also strengthen the capacity of the provincial and federal governments to improve sector governance and attract quality private investments.
Second Component related to Transaction Advisory Services, which will support of the governments' efforts to attract quality private investors to develop Thar coal and to produce thermal power, the project will (i) update, or develop where needed, key technical, financial, market, and local impact analysis and other information relevant to the investors, including a basin-wide land-use plan for Thar; and (ii) provide transaction advisory services and due-diligence monitoring for a coal mine and an IPP transactions in a selected block of Thar, including preparation / issuance of requests for proposals, and assistance to the government with bid evaluations, negotiations, and financial closing, he mentioned.
Commenting on the Third Component, Michael Stanley said that this related to Project Management and Communications. Finance costs associated with managing the proposed Project, including project co-ordination among implementing agencies, procurement and financial management, and environmental and social management.
The project will also assist the Government of Sindh and Government of Pakistan to develop communications and outreach strategy with regards to the Project and to improve public consultations. Michael Stanley said that Pakistan faces increasing economic hardship through reliance on high-cost, imported energy resources used in end-use markets.
The healthy energy demand growth is expected to continue in the coming two decades, with Pakistan requiring an estimated additional 35,000 MW of power generation capacity by 2020, according to GoP's projections. The GoP expects a significant demand-supply gap to remain even after all low-carbon energy resources (such as indigenous hydropower, gas, and renewables) are matched to demand:
-- Pakistan's hydroelectric potential is estimated at 40,000 MW, out of which the economic hydroelectric potential is around 20,000 MW, whereas the capacity developed to date amounts to 5,010 MW. The risks to development include hydrological and geological risks; and production is seasonal (Pakistan's current installed hydropower capacity of 6,400MW falls to less than 2,000MW during the 4-5 months of winter when water flows are minimal). Cost of hydroelectric projects is very high, while interest from private sector has been low given security concerns.
By Farhan Bokhari in Islamabad
Published: October 18 2008
Pakistan officials on Saturday announced fresh plans to restore investor confidence and avoid default on foreign payments. The plans include the option of returning to an International Monetary Fund program to stem a further fall in already depleted foreign exchange reserves.
Pakistan cannot wait for long. Pakistan has to take action in the next 30 days said Shaukat Tarin, financial adviser to the prime minister. Mr Tarin acknowledged for the first time that a future IMF program was one of the options on the table, in addition to significant financial assistance from industrialized western countries and China.
Mr Tarin said a default on foreign debt payments was out of the question, adding that friendly countries and international financial multilateral institutions such as the World Bank and the Asian Development Bank were expected to give more than $4.5bn to help fill a financing gap for the current financial year.
Mr Tarin said Pakistan was seeking an additional $5bn-$6bn to not only fill the gap, but also build up quickly depleting foreign currency reserves within the central bank. However economists said Pakistan needs $10bn-$12bn in additional external resources to overcome the crunch.
I think Mr Tarin may be understating the worst case scenario if Pakistan is not able to restore confidence even with $5bn- $6bn of additional inflows. We are then looking at $10bn-$12bn as a safe option said a senior western economist.
Shah Mehmood Qureshi, the foreign minister, who has just returned from China, where he spent the previous four days accompanying president Asif Ali Zardari on a diplomatic visit, said China had agreed to widen the scope of its economic and nuclear energy cooperation with Pakistan. They [China] have agreed to help Pakistan more than the resource gap said Mr Qureshi without specifying the Chinese commitment in dollar terms.
A Pakistani finance ministry official said China had offered to help Pakistan avoid a default in its external payments with an initial offer of a soft loan of $500m. This offer is open ended. When there is a tough crunch, the Chinese will help us added the finance ministry official.
Mr Qureshi revealed for the first time that China had agreed to build two new nuclear power reactors in the central part of Pakistans Punjab province at Chashma. The Chinese have already built one reactor and are building a second in the region.
Western diplomats said the agreement was not a duplicate of the India-US civil nuclear accord signed recently, though it reflected Chinas commitment to further promote its nuclear energy cooperation with Pakistan.
This is very much a step-by-step Chinese approach where they will go from one reactor to another rather than publicly announce a long-term program and also get international approval from key institutions such as the nuclear suppliers group or NSG-the international umbrella of key nuclear supplier nations.
In recent years, Pakistan has faced a storm of international criticism over its nuclear program after it was revealed in 2004 that Abdul Qadeer Khan, the father of the countrys nuclear program, had traded knowledge and technology with Iran, Libya and North Korea.
Mr Khan has since lived practically under house arrest in Islamabad while successive Pakistani governments have denied requests from the western world, notably the US, for investigators to interview him with the aim of assessing the scale of Irans nuclear program.
Published: October 18 2008
Pakistan officials on Saturday announced fresh plans to restore investor confidence and avoid default on foreign payments. The plans include the option of returning to an International Monetary Fund program to stem a further fall in already depleted foreign exchange reserves.
Pakistan cannot wait for long. Pakistan has to take action in the next 30 days said Shaukat Tarin, financial adviser to the prime minister. Mr Tarin acknowledged for the first time that a future IMF program was one of the options on the table, in addition to significant financial assistance from industrialized western countries and China.
Mr Tarin said a default on foreign debt payments was out of the question, adding that friendly countries and international financial multilateral institutions such as the World Bank and the Asian Development Bank were expected to give more than $4.5bn to help fill a financing gap for the current financial year.
Mr Tarin said Pakistan was seeking an additional $5bn-$6bn to not only fill the gap, but also build up quickly depleting foreign currency reserves within the central bank. However economists said Pakistan needs $10bn-$12bn in additional external resources to overcome the crunch.
I think Mr Tarin may be understating the worst case scenario if Pakistan is not able to restore confidence even with $5bn- $6bn of additional inflows. We are then looking at $10bn-$12bn as a safe option said a senior western economist.
Shah Mehmood Qureshi, the foreign minister, who has just returned from China, where he spent the previous four days accompanying president Asif Ali Zardari on a diplomatic visit, said China had agreed to widen the scope of its economic and nuclear energy cooperation with Pakistan. They [China] have agreed to help Pakistan more than the resource gap said Mr Qureshi without specifying the Chinese commitment in dollar terms.
A Pakistani finance ministry official said China had offered to help Pakistan avoid a default in its external payments with an initial offer of a soft loan of $500m. This offer is open ended. When there is a tough crunch, the Chinese will help us added the finance ministry official.
Mr Qureshi revealed for the first time that China had agreed to build two new nuclear power reactors in the central part of Pakistans Punjab province at Chashma. The Chinese have already built one reactor and are building a second in the region.
Western diplomats said the agreement was not a duplicate of the India-US civil nuclear accord signed recently, though it reflected Chinas commitment to further promote its nuclear energy cooperation with Pakistan.
This is very much a step-by-step Chinese approach where they will go from one reactor to another rather than publicly announce a long-term program and also get international approval from key institutions such as the nuclear suppliers group or NSG-the international umbrella of key nuclear supplier nations.
In recent years, Pakistan has faced a storm of international criticism over its nuclear program after it was revealed in 2004 that Abdul Qadeer Khan, the father of the countrys nuclear program, had traded knowledge and technology with Iran, Libya and North Korea.
Mr Khan has since lived practically under house arrest in Islamabad while successive Pakistani governments have denied requests from the western world, notably the US, for investigators to interview him with the aim of assessing the scale of Irans nuclear program.
Sunday, October 19, 2008
ISLAMABAD: Pakistans economic managers agreed on Saturday to approach the International Monetary Fund (IMF) if they fail to win required injection of dollars to fill the financing gap in balance of payments.
Only the announcement of $7 billion commitment to fill the financing gap will ease pressure on foreign reserves and the rupee value. Dollar inflows must start coming into the national kitty within one and half months, a senior official at the finance ministry said talking to The News after the Adviser to Prime Minister Shaukat Tarins press conference here on Saturday.
Governor State Bank of Pakistan Dr Shamshad Akhtar on Friday announced a bailout package for the banking sector by reducing CRR and SLR, which would ensure injection of Rs220 billion into banks.
This package was announced one week after the finance ministry gave written recommendations to the SBP for taking these steps on October 9. Evidently the central bank had to evaluate the viability of the proposals and take decision keeping in view the immediate and long-term affects of lowering the safety standards that protect the depositors interests.
Pakistan is facing a financing gap of $7 billion. If International Financial Institutions (IFIs) assistance worth $3.5 billion materializes, Islamabad will have to arrange remaining $3.5 billion from the rest of the world.
There is no other option left except formally writing a letter to the IMF for extending its balance of payments support to Pakistan. Now it is a matter of time when Islamabad formally approaches the Fund for a bailout package and it will be done within next one and half months, said a high-level official at the finance ministry.
Adviser to PM on Finance Shaukat Tarin said Saturday if Pakistan fails to arrange financing from plan A and B there would be the option of approaching the IMF.
The official sources said that President Zardaris expected from Chinese government to extend balance of payment support on immediate basis.
The second expectation of Islamabad leads towards Saudi Arabia, UAE and Kuwait. Zardaris third expectation is getting some assistance package from the Friends of Pakistan Forum, which will meet by the next month in UAE.
But the sources in Finance Ministry made it clear that the Friends of Pakistan forum is not meant for providing financial assistance to Pakistan. So dont increase expectations from the Friends of Pakistan forum.
Saudi Oil Facility on deferred payment on immediate basis seems unlikely, the sources said adding no Muslim country seems willing to rescue Pakistan by injecting $5-$7 billion on immediate basis.
President Asif Ali Zardari was contacting bilateral donors countries to inject few billion dollars in the next one and a half month period, a senior official of Gilani government said.
If it does not happen the remaining foreign reserves will start depleting rapidly as measures to curtail imports have failed, said the sources.
He was of the view that Pakistan would not default on paying $500 million Euro bond instalment, which will be due by Feb 2009.
ISLAMABAD, Oct 18: Adviser to the Prime Minister on Finance Shaukat Tareen unveiled a plan on Saturday to line up $4 billion with a short-term financial lifeline to bridge the deficit in balance of payments and build foreign exchange reserves.
I am very confident that we can do whatever it takes to build our foreign exchange reserves and avoid default, Mr Tareen told journalists after addressing a press conference.
Mr Tareen attended the Word Bank-IMF meetings in Washington recently and visited Beijing with President Asif Ali Zardari to drum up support for averting any balance of payments crisis.
He said that Pakistan needed around $4 billion for bridging the gap in balance of payments during the current fiscal year. He said his plan would be finalised in four to five weeks after consultation with all stakeholders. We will be in a sound position in the next 30 to 60 days, he asserted.
He said plan A aimed at bridging the gap in balance of payments, mainly through multilateral lenders (the Word Bank and Asian Development Bank) and frontloading disbursements from development assistance programmes in the current fiscal year.
The PMs adviser said the Islamic Development Bank and Britains Department for International Development were also expected to virtually double their planned assistance.
The World Bank will provide $1.5 billion and the ADB $1.6 billion. Five hundred million pounds would come from DFID, $500 million from the IDB and $1.5 billion from workers remittances bonds.
This is in excess of our needs and does not include assistance from the Friends of Pakistan forum, he said.
Mr Tareen said that under plan B, the government was expecting the required assistance from Friends of Pakistan to balance its budget deficit. China and Saudi Arabia are likely to make huge commitments at the Friends of Pakistan meeting in Abu Dhabi next month.
He said under plan C, Pakistan would seek assistance from the International Monetary Fund. We can go to the IMF if we want, but only as a backup, Mr Tareen said, adding that he was confident Pakistan had a viable plan to surmount its problems.
If the IMF approves our plan, then we will go for it. We are not getting additional conditionality. If they approve our plan, we can always talk. Pakistan cannot wait for a long time, he replied to a questioner.
We need action to induce money into the economy over the next one month. Otherwise, we have to see option C to curtail the decline in reserves, he said. The plan has been presented to international financial institutions to bail out the country from current economic woes.
He said donors were informed that the government had compounded peoples misery by increasing electricity tariffs and oil prices. We urged them to come forward to help the six-month old democratic government, he said.
Mr Tareen gave an upbeat account of his meetings with finance ministers of various countries and heads of international financial institutions, emphasising that only the next 12 to 24 months were problematic for Pakistan.
He said at the end of this period, macro-economic indictors inflation and fiscal deficit -- would improve and expenditure would be reduced. Tax and non-tax revenue would be increased from 10.5 per cent to 15 per cent within five years, he added.
POVERTY: Talking about poverty alleviation, the adviser said poor families would be given vocational training to help them come out of poverty. He said medical insurance ranging between Rs15,000 and Rs20,000 per year would be given to the poor. More working facilities would be created at the union council level to create employment opportunities, he added.
Mr Tareen said the rupee had been overvalued for the past two to three years. The overvaluation inflicted heavy losses to local industries. It has increased cost of doing business, while consumers opted for cheaper imports.
We need a flexible and realistic exchange rate. It does not mean that the rupee would regain its value at 60 against the dollar, but it would be realistic.We have to show flexibility in the currency to discourage imports. The economists are working on it.
The adviser said agriculture growth had been declining for the past few years. He said the government was planning to augment water resources, implement food processing facilities, improve marketing and credit availability.
Mr Tareen said the government had decided to establish a trust to consolidate sick industries. After consolidation, these units should go into the hands of efficient people. We need export diversification. We will give incentives to encourage value-addition.
He said the government was planning to develop an integrated energy plan that would not only include electricity and gas, but also coal-based energy.
He said more reforms would be introduced in the banking sector and the stock market would be integrated with the mainstream economy.
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Pakistan can go to IMF: TarinBy SHAHBAZ RANA submitted 15 hours 5 minutes ago
ISLAMABAD - Pakistan would have to knock the door of International Monetary Fund (IMF), if it could not get much-needed financial assistance from other world donor agencies and Friends of Pakistan during next month and a half, says Shaukat Tarin, Advisor to Prime Minister on Finance.
We cannot wait any longer...Pakistan must show action in 30 days time, said the Advisor during a joint Press conference with Foreign Minister Shah Mahmood Qureshi here on Saturday after visiting China.
The Foreign Minister said China would help Pakistan build two more nuclear power plants, Chasma 3 and 4, with 680 megawatts power capacity. The total cost of these projects is estimated Rs 140 billion. On a question, Qureshi said Pak-China civil nuclear cooperation was an ongoing process and China recognised Pakistan needs. He said security of Chinese investors would be the priority of Pakistan.
To a question on seeking Nuclear Suppliers Groups (NSG) confirmation for expansion of civilian nuclear programme, the Foreign Minister said Pakistan and China had a strategic partnership and had been cooperating in the civil nuclear field for a long time.
He said Pakistan is a responsible state and is cognizant of its international obligations. Pakistan and China had cooperated in civil nuclear field under difficult circumstances in the past and would continue to do so in the future, he added.
Tarin said the IMF would sit in Dubai within 10 days and if it endorsed Pakistans proposed plan, then the country could get financial assistance from the Fund on its own conditions as back-up.
Pakistan is passing through the worst balance of payments crisis. The current account deficit, gap between foreign receipts and expenditure, has widened to $3.9 billion in just three months of the current fiscal year. The net foreign investment dipped by 9.7 per cent in the first quarter and the central bank is only left with $4.7 billion, which can hardly support one-and-a-half-month imports in the backdrop of fast devaluing rupee which was traded at 1$=Rs87 in the open market.
The Advisor said the rupee was falling because of reserves were eroding fast and, he added, when inflows would start coming in, rupee would be stable. He said the issue of Saudi oil facility worth $5 billion will be settled in next month and added Pakistan was not going to default on Sukuk bond, which will mature in February 2009.
We can arrange up to $5 billion immediately but we also have to look what we want, he added.
The newly-appointed Advisor was confident that Pakistan had a viable plan to work through its problems. He said under the Plan A, Pakistan was hopeful to get aid from the International Financial Institutions and if that could not work, then it would turn to Plan B, envisaging assistance from the Friends of Pakistan, which were going to meet in mid-November in Abu Dhabi, UAE
ISLAMABAD - Pakistan would have to knock the door of International Monetary Fund (IMF), if it could not get much-needed financial assistance from other world donor agencies and Friends of Pakistan during next month and a half, says Shaukat Tarin, Advisor to Prime Minister on Finance.
We cannot wait any longer...Pakistan must show action in 30 days time, said the Advisor during a joint Press conference with Foreign Minister Shah Mahmood Qureshi here on Saturday after visiting China.
The Foreign Minister said China would help Pakistan build two more nuclear power plants, Chasma 3 and 4, with 680 megawatts power capacity. The total cost of these projects is estimated Rs 140 billion. On a question, Qureshi said Pak-China civil nuclear cooperation was an ongoing process and China recognised Pakistan needs. He said security of Chinese investors would be the priority of Pakistan.
To a question on seeking Nuclear Suppliers Groups (NSG) confirmation for expansion of civilian nuclear programme, the Foreign Minister said Pakistan and China had a strategic partnership and had been cooperating in the civil nuclear field for a long time.
He said Pakistan is a responsible state and is cognizant of its international obligations. Pakistan and China had cooperated in civil nuclear field under difficult circumstances in the past and would continue to do so in the future, he added.
Tarin said the IMF would sit in Dubai within 10 days and if it endorsed Pakistans proposed plan, then the country could get financial assistance from the Fund on its own conditions as back-up.
Pakistan is passing through the worst balance of payments crisis. The current account deficit, gap between foreign receipts and expenditure, has widened to $3.9 billion in just three months of the current fiscal year. The net foreign investment dipped by 9.7 per cent in the first quarter and the central bank is only left with $4.7 billion, which can hardly support one-and-a-half-month imports in the backdrop of fast devaluing rupee which was traded at 1$=Rs87 in the open market.
The Advisor said the rupee was falling because of reserves were eroding fast and, he added, when inflows would start coming in, rupee would be stable. He said the issue of Saudi oil facility worth $5 billion will be settled in next month and added Pakistan was not going to default on Sukuk bond, which will mature in February 2009.
We can arrange up to $5 billion immediately but we also have to look what we want, he added.
The newly-appointed Advisor was confident that Pakistan had a viable plan to work through its problems. He said under the Plan A, Pakistan was hopeful to get aid from the International Financial Institutions and if that could not work, then it would turn to Plan B, envisaging assistance from the Friends of Pakistan, which were going to meet in mid-November in Abu Dhabi, UAE
* Some market players initially failed to understand mechanics of changes introduced by central bank
By Mushfiq Ahmad
KARACHI: The State Bank of Pakistan had to inject Rs 5.448 billion into the banking system on Saturday even after the host of measures that the central bank governor announced on Friday took effect.
There was a scheduled outflow of Rs 58 billion from the market against the inflow of Rs 60 billion due to cut in CRR by 200 basis points. The net inflow in the market was only Rs 2 billion, said a banker. As the markets needs were larger, the banks went for discounting and the SBP had to inject money, he added.
A treasury official at one of the five big commercial banks said that some of the market players initially failed to understand the true impact of the measures announced by the Governor State Bank. The market actually received only Rs 60 billion in cash on Saturday as against Rs 180 billion or Rs 210 billion the people had expected after reading newspapers and listening to television stations, he said. The exemption of SLR on deposits of one year and above and the increased eligibility of PIBs towards SLR did not increase availability of cash in the banking system, but it did increase the availability of securities with the banks.
People were very relaxed in early trade as they were lending money even at 7-8 percent, he said. Later when they realized how much was actually available to the market they had to go to the central banks discounting window.
The borrowing at call rate, however, declined because the banks that were borrowing money at call rate because of non-availability of securities were able to borrow money at repo rate thanks to increased availability of securities. But some small banks continued to borrow money at 20-22 percent call rate because the cut in CRR and exemption of SLR did not benefit them much.
Small banks will continue to face problems until they recover their loans and bring their advance to deposit ratio down, said a seasoned banker. Their loan portfolio is too big. They actually need to recover their money from borrowers. That is the real solution of their problems. The governor did say at the press conference that some banks ADR was too high and they need to bring it down.
The treasury official said the central bank had not actually loosened its monetary stance. Restricting the banks from keeping ADR above 70 percent means the monetary stance has not changed, he said. It will result in 30 percent of banks money going to government securities, he added.
As a result of these measures, banks solvency would increase, commented a banker. After bringing ADR to 70 percent and investing the rest of the money in government securities the banks would be able to borrow money from the central bank whenever they are short of cash. There will not be such panic in the market as has been witnessed in the recent weeks, he added.
KARACHI: Pakistan can earn $1 billion annually by exporting its value-added precious and semi precious coloured gemstones, Jawad H Khan, Chief Executive Pakistan Gems and Jewellery Development Company (PGJDC), said Saturday.
In order to achieve $1 billion export annually, there is a need to expedite the entire value chain thorough undertaking different initiatives including raising value chain productivity, setting up common facility training and manufacturing gems processing centres.
Currently we are exporting our precious gemstones in raw shape at throwaway prices because our workforce and professionals are not aware of latest mining skills besides traders do not have the facilities and resources of value-addition, he added. He said we need to create awareness of latest technology being used by the gems and jewellery sector of other countries and also need to focus on value added exports of gemstone from Pakistan.
To achieve the billion-dollar export target annually, PGJDC has established countrys first Gems and Jewellery Training and Manufacturing Centre (GJTMC) in Saddar Town recently. He said GJTMC would not only be used to impart technical training but industry could also use the machines to produce their big orders on latest machines by taking them on lease.
He said GJTMC of Karachi was first of the four planned centres to be established by PGJDC. Such centres are also being established in Lahore, Gilgit and Quetta.
CAD/CAM a state of the art jewellery manufacturing technology has been introduced in Pakistan for the first time by PGJDC. One each of CAD and CAM machines have been installed in two of the PGJDC in Karachi and Lahore. These centres would provide state of the art training in cutting and polishing gemstones as well as common processing facilities in order to enhance the value of gemstones sold at the local and international markets. He hoped trade would respond positively and the exports and imports would grow to hundreds of millions of dollars.
He said participants from across the world took keen interest in Pakistani Gemstone especially traders from Thailand, Sri Lanka and China the ICA at the Gem Show 2008, held in Dubai on October 13-15, 2008. He said PGJDC had displayed a rich variety of gemstones from Pakistan and made success in terms of establishing business-to-business contacts. He said possibly export would cross the billion-dollar mark and all this would happen for the first time in the history of Pakistans jewellery industry.
ISLAMABAD (October 19 2008): Finance Minister Naveed Qamar has underlined the need to reduce gap between imports and exports to drive the economy from the negative zone to comfortable levels. The gap has considerably increased due to record high oil prices in the world and diminishing purchasing power of rupee against greenback whereas the exports have not registered increase quantitatively and in price terms accordingly.
Talking to BBC Radio he said, the government is trying to narrow the gap between imports and exports for stabilising reserves and national economy. "If you see the remittances, they are pouring in on record level whereas the exports were going at normal rate besides routine income from traditional channels."
The import bill has surged considerably due to multiple factors, he said. "We only need to narrow the gap and we are doing that", he remarked. Attributing the fiscal deficit to the increased borrowing from banks since October last year, he said, the government was aware of the need to curtail the same.
Responding to a question about the help from World Bank and IMF, he said IMF examined measures taken by the government in this regard against their own models. "Then they too testified that these steps are sufficient to keep our economy under checks, which are needed." However, he added, such things take time to yield results.
When you take a step today, its effect comes after three or four months." Some other measures still need more time to produce desired results, he said adding that some of the measures taken by the present economic managers would fully impact the economy in three to four months.
WASHINGTON (October 19 2008): The United States and Pakistan should draw a plan to measure up to Pakistan's immediate economic and development requirements, as lingering economic difficulties could affect the country's war on terror efforts, former Interior Minister Aftab Sherpao said at a Washington think tank.
The chairman of PPP-Sherpao party said Pakistan remained firmly committed to the fight against terrorism in its own interest. "We have two challenges - one is security the other is economic - and they are intertwined - if we melt down economically, how do you expect us to counter the menace of terrorism (more effectively) there," he stated at the US Institute of Peace. Asked as to what Pakistan expects from the US at this moment, Sherpao underlined the importance of economic and anti-terrorism equipment support.
He welcomed Biden-Lugar legislation pending before the US Congress on expanding economic assistance for Pakistan to 1.5 billion dollars annually over next 10 years but noted the two partners need to move quickly on co-operation in the energy, economic and agricultural fields.
"Both Pakistan and the US share the goal to eliminate terrorism - we should help and complement each other," he said while analysing challenges facing Pakistan in its border areas with Afghanistan.
"If there is something that hurts us, we have to come up with solutions, which are compatible," he remarked when questioned about American unilateral strikes into Pakistani territory, which he said are counterproductive to anti-terror efforts as they add to negativity.
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