Pakistan Economy - News & Updates - Archive

[ejaz007]

IMF approves 2nd tranche of its aid to Pakistan

LAHORE: The IMF has approved $840million in second tranche of its aid to Pakistan, a private TV channel reported. According to the channel, the approval was given in a meeting of the IMF Executive Board. The board reviewed the fund’s aid to Pakistan, expressed its satisfaction and approved the second tranche. The money would be transferred to Pakistan on Monday (today), the channel reported. Meanwhile, the World Bank also approved $500million interest-free loan to Pakistan for poverty eradication and tax reforms, the channel said. daily times monitor

Daily Times - Leading News Resource of Pakistan

 

[ejaz007]

Pakistan losing $6 billion annually in war on terror: SCCI


LAHORE (March 31 2009): Pakistans economy is losing $6billion a year to counter terrorism, while budgetary allocations for this purpose are affecting the pace of development. The VP, SAARC Chamber of Commerce and Industry (SCCI) Pakistan Chapter and founder Chairman, Pak-US Business Council, Iftikhar Ali Malik said.

Strongly condemning the terrorist attack on Police Training Centre, Manawan on Monday, he said Pakistan paid hugely in terms of human, social and economic cost for the war on terror and so far has suffered s tremendous financial loss of $68 billion, since the turmoil in Afghanistan.

He said that Pakistans participation in the war on terror has led to unemployment and displacement of people leading to an increase in the crime rate. Malik also said that FPCCI, other chambers and entire business community across the country stand united with the democratically elected government in the wake of Indian threats following Mumbai incident. Pakistan is a peace loving country and its democratically elected leadership, always condemned the menace of terrorism in the world, he said.

Further, Pakistan is still victim of terrorism and will continue its efforts to stamp out this menace, he said adding that Pakistani leadership is always ready to negotiate with India for the settlement of all outstanding disputes and issues through parleys. On behalf of the entire business community, he categorically assured the government that traders would place their resources at the disposal of the government against any threat and to purge the country of menace of terrorism.

Business Recorder [Pakistan's First Financial Daily]

 

[ejaz007]

Pakistan to get $1.4b loan today
Published: March 31, 2009


WASHINGTON - Pakistan will receive a total of US $1.4 billion by Tuesday including US $500 million interest-free credit from the World Bank for Poverty Reduction and Economic Support Programme and $840 million from the IMF following the successful 1st review of the Standby Arrangements signed last Nov 2008 achieving all the targets.

"This is an encouraging sign for economic stabilisation efforts of the government and reflect increasing confidence of the international institutions", a Press release of the Pakistan Embassy said. "The transfer will bolster Pakistan's foreign exchange reserves and help Pakistan in having its credit rating revised upward as well as enhancing investors' confidence both at home and internationally".

In this regard, the embassy Press release stated, Ambassador Hussain Haqqani had an extensive meeting with WB Vice- President Isabelle Gueroro in Washington Monday and appreciated WB's support to Pakistan's endeavours for economic stabilisation and early recovery.

The WB VP assured Haqqani of the WB's continued support. The targeted project under World Bank credit, Poverty Reduction and Economic Support Operation, seeks to reforming the tax administration and is also expected to strengthen Pakistan's competitiveness.

Pakistan to get $1.4b loan today | Pakistan | News | Newspaper | Daily | English | Online

 

[Neo]

$1bn to be sought from FoP to raise special force ​

Tuesday, March 31, 2009

ISLAMABAD: Pakistan will ask Friends of Pakistan (FoP) to provide $500 million to $1 billion assistance for establishing 80,000-men special force equipped with the latest arms to combat militants in various parts of the country especially in volatile tribal areas, it is learnt.

Pakistan will table a ten year strategic development framework before the FoP forum for seeking $26 billion for twenty crucial projects. It will also ask the donors to provide additional $4 to $6 billion for the budgetary support and to overcome balance of payments difficulties for the next two years.

“Pakistan will seek $500 to $1 billion assistance for establishing a special force, which will be given full training only to control the insurgency,” a high-level official of Gilani government confided to ‘The News’ in a background interview on Monday.

The major projects included in the list are construction of the Diamer-Basha dam, skill development, establishing of a special force for fighting against militants and many other projects related to the social sector. The Basha dam will be unbundled into civil works and installation of power plants.

The experts level meeting of the FoP forum, which will be held tomorrow (Wednesday) in Dubai, will fine tune the proposed strategy for taking decisions that would be tabled during the ministerial level meeting going to be held in Tokyo on April 17.

The official said that there would be two sessions held in Tokyo, during the FoP forum, one would be related to establish strategic development partnership with donor countries and that session would not be meant for making pledges.

The second session will be meant for seeking budgetary as well as balance of payment support to the tune of $4 to $6 billion for the next two years, said the official and added that these were the main reasons for co-sponsoring of the event jointly by Japan and World Bank.

During the second session of the FoP, Islamabad will apprise the donors about financial needs owing to budgetary constraints as well as balance of payment difficulties being faced by the country over the next two years. “We will seek $4 to $6 billion for budgetary support over the next couple of years,” he added. The official was of the view that the world economy was already facing recession and its negative impacts would start appearing in the second half of the ongoing fiscal ending on June 30, 2009, in terms of affecting exports, remittances and foreign direct investments. “We will ask the world to compensate us in the wake of ongoing war against terror that resulted in loosing $34 billion after 9/11, 2001 scenario when Islamabad decided to stand with the USA in its war,” said the official. Pakistan’s economic managers, the official said, would also brief the donors about their plans to mobilise maximum tax revenues from domestic resources in a bid to decrease its dependence on foreign inflows in the future line of action. “There is need to bring untapped sectors into the tax net in order to improve the tax to GDP ratio,” said the officials and added that the services sector could be fully taxed in the next budget 2009-10. —MH

 

[Neo]

Pakistan seeks US budgetary support ​

Tuesday, March 31, 2009

ISLAMABAD: Pakistan has asked the Obama Administration to bifurcate $1.5 billion assistance per annum for Islamabad into the budgetary support as well as for the social sector projects, in order to extend its help both for the government and people of Pakistan, it is reliably learnt.

Pakistan has proposed to the US for providing $800 million as budgetary support while remaining $700 million for the projects, which will be executed through USAID, mainly for social sector out of total $1.5 billion per annum assistance package announced by the President Obama.

The last Bush administration had abandoned budgetary support for Islamabad in the last two years by restricting its annual assistance for the development projects through USAID. In the first three years, the Bush regime had extended its annual $600 million in shape of $300 million as budgetary support and remaining $300 million as Foreign Military Grants (FMG).

“Now we are pursuing Washington to bifurcate its upcoming annual $1.5 billion assistance both for the budgetary support as well as for projects through USAID,” a high-level official of Pakistan’s embassy in Washington told The News on Sunday.

The official said that the Foreign Relation Committee would start hearing about its upcoming assistance for Pakistan from Monday and procedural requirements would take one and half month to get through the legislation process. “Pakistan’s assistance is expected to be received from the next financial year, starting from July 2009,” added the official.

The official said that it was not yet known in which shape the US is going to extend its support for Pakistan. However, it is the desire of Islamabad to provide it the budgetary support of $800 million per annum from the next fiscal year, added the official.

Pakistan’s embassy in the US, the official said, is hardly pursuing Islamabad’s case before the Obama administration in order to convince them for providing support in accordance with the objectives outlined by the incumbent regime.

Sharing break-up of the total US assistance to the tune of over 10 billion to Islamabad in the aftermath of 9/11 scenario, the country was going to receive around $5 billion as reimbursement against expenditures already incurred by Islamabad for continuation of war in tribal areas, adjacent to the war torn Afghanistan.

Against a total bilateral assistance of $5 billion, Islamabad has so far received $297 million every year since 2003-04 to 2007-08 in shape of Foreign Military Grants (FMG). There are service charges being cut down by the US authorities to tune of $3 million every year. The total amount in shape of FMG received by Pakistan was around $1.3 billion till 2007-08.

The US had also promised to provide $3 billion in the shape of budgetary support to Pakistan out of which Islamabad received $300 million per annum. The budgetary support has been shifted towards projects going on under US from the current fiscal year.

The official said Pakistan is paying a heavy price after becoming the front line state in ongoing war against terror.

 

[Neo]

ECNEC approves 29 projects worth Rs77.476bn ​

Okays Rs22.5bn to improve power distribution​

Tuesday, March 31, 2009

ISLAMABAD: The Executive Committee of National Economic Council (Ecnec) that met here on Monday with Advisor to Prime Minister, Shaukat Tarin, approved 29 projects of national importance valued at Rs77.476 billion.

The meeting, however, took up 32 projects in total, but accorded approval to 29 projects. The meeting approved Rs22.5 billion for enhancing power distribution of seven electric distribution companies (Discos), which will not only ensure the smooth supply of quality electricity, but will also reduce the line losses to a large extent.

The current power distribution systems has been dilapidated and not sound enough to sustain the power load which has increased manifold during the span of last eight years. The existing system gets tripped and chocked when the load demand increases, particularly in the summer season.

For this purpose, the meeting approved Rs1.8 billion for power distribution enhancement of Faisalabad Electric Supply Company (Fesco), Rs1.07 billion for Multan Electric Power Company, Rs3.4 billion for Islamabad Electric Power company, Rs4.1 billion for Hyderabad Electric Supply Company, Rs2.28 billion for Quetta Electric Supply Company, Rs4.1 billion for Lahore Electric Supply Company and Rs4 billion for Peshawar Electric Supply Company.

For the project, Asian Development Bank would provide 80 per cent financing, while 20 per cent would be arranged by seven power distribution companies on their own.

The meeting approved electrification of 86 villages in Dera Bugti by QESCO at a total cost of Rs717.71 million to be executed in 12 months through installation of transmission lines, transformers and other allied equipments and necessary civil work, stipulating that Government of Balochistan would form a Committee comprising local MNAs, MPAs and District Nazims who would identify the villages needing electrification, a list of which would be provided to ECNEC.

Ecnec approved the establishment of 43.5 MW Jagran-II Hydropower Project in the Muzaffarabad district, sponsored by the government of AJK at a total cost of Rs4631.02 million involving FEC. The project envisages construction of 43.5 MW Jagran-II Hydropower Station on the Neelum River, and is designed to provide an additional installed capacity in the system. ECNEC also approved the establishment of 14.4 MW Jhing Hydropower Project in Muzaffarabad district, sponsored by government of AJK at a total cost of Rs1813.85 million. It also envisages the construction of 14.4 MW of hydropower station planned at Jhing Nullah which is the right bank tributary of Neelum River.

Ecnec approved Higher Education Commission’s Project titled Faculty Development Programme of Bahauddin Zakariya University, Multan for provision of 100 PhD foreign scholarships. ECNEC advised HEC to circulate a list of scholarships allocated to other universities of the country which must address no discrimination component, adding that the list explaining training disciplines be obtained and circulated. ECNEC held that projects falling under education and health development sectors may be presented before FOPs for support.

The meeting approved the Northern Area Health Development Project Phase-II at a total cost of Rs796.050 million that would provide basic health services to the under-served population and strengthen primary health care services besides improving secondary and tertiary health care services.

The meeting approved SUPARCO/Ministry of Defense Pakistan Communication Satellite System Project (PAKSAT-IR) which is designed to develop/manufacture and launch a Geo-Synchronous Orbit Communication Satellite replacing the existing Leased Satellite PAKSAT-I. It constituted an independent project management committee comprising representatives from SUPARCO, MOD (SPD), Ministry of IT and other stakeholders to oversee the implementation of defense as well as civil benefit related components.

Ecnec approved Government of Punjab’s sewerage and water supply project in Multan City (Part-I) at a total cost of Rs2817,208 million which is designed to provide the basic facilities of sewerage and water supply in the un-served areas of Multan City.

The meeting approved the Ministry of Housing and Works’ project for construction of a new Secretariat Block at the Constitution Avenue, Islamabad, at a total cost of Rs3476.363 million, advising the ministry and the Planning Commission to incorporate a financial statement mentioning total savings accruing to GOP in terms of rentals saved.

Ecnec conditionally approved the Ministry of Railways’ project for procurement/manufacturing of 530 new design bogies/wagons including break vans at a total cost of Rs4134.732 million, directing that a Committee comprising ministers for privatisation, communication, finance and representatives of the Planning Commission and provincial governments be set up to finalise and recommend Pakistan Railways Strategic and Credible Business Plan that meets the business criteria laid down by ECNEC within one month where after ECNEC’s approval shall stand formalised.

The meeting advised the Ministry of Defense and Planning and Development Division to submit a background report on Aviation Division’s Project titled New Gawadar International Airport, acquisition of land project, explaining as to how an earlier budgetary outlay was released during FY-2005-06. The project was deferred for further consideration till filing of the report.

The meeting approved the withdrawal of Government of Punjab’s project on widening and improvement of Gujranwala bypass on technical reasons. Ecnec also approved Government of Punjab’s project for construction of the Multan Southern Bypass (dual carriage way) to Bahawalpur Chowk at a total cost of Rs1569.323 million.

The meeting approved Government of Balochistan’s construction of black-top road from Sui to Uch field (57 KM) in Dera Bugti Balochistan at a total cost of Rs797.711 million. The project would facilitate various oil and gas exploration companies engaged in the production of gas and minerals in the area, besides providing better transportation facilities to the local people through the shortest route from Balochistan to Sindh.

Ecnec approved CDA’s construction of Cherah Dam project across the Soan River to be executed jointly by the Government of Punjab and CDA at a total cost of Rs5307.22 million. The project after completion shall provide an additional drinking water supply of 15 MGD to the twin cities of Rawalpindi and Islamabad.

The meeting approved the Ministry of Water and Power and Irrigation and Power Department and Government of Sindh’s joint project for lining of distributaries and minors in Sindh Province covering Guddu, Sukkur and Kotri barrages area of the province of Sindh at a total cost of Rs13828.322 million.

ECNEC advised the Planning Commission to give details of the budget expenditure amount of each province for similar projects. The project is designed to control seepage losses from canal system to improve irrigation efficiency for provision of assured water supply to existing irrigated land under cultivation.

The meeting approved the Ministry of Water and Power and the Government of NWFP’s joint project titled Bazai Irrigation Scheme, NWFP, located in the districts of Mardan and Malakand Agency of NWFP at a total cost of Rs1796.621 million for provision of better irrigation facilities to an area of about 20,200 acres through construction of 41.1 KM long canal system.

The meeting approved the Minister for Railways’ recommendations for replacement of old and obsolete signals gear project from Lodharan-Khanewal-Shahdara Bagh, main line section of Pakistan railways, at a total cost of $129,496,782 (Rs14.4 billion).

The meeting approved Ministry of Inter Provincial Coordinationís summary on finalisation of guidelines for funding of projects launched on the directives of the President/Prime Minister including vertical projects launched by the federal government in provinces and federal projects launched by the federal government in provinces according to a pre-set formula, advising that AJK, IPC representation be given in the Federal IPC.

Ecnec approved various transport and communications related projects of the Punjab government, titled Construction of Bosan Road in Multan city, at a total cost of Rs910.850 million, NHAs Project for rehabilitation of road from Gharo to Ketti Bunder at a total cost of Rs3036.466 million in the Thatta district and NHA’s other project for rehabilitation of Kambar-Shahdadkot Road in the Khambar district, Shahdadkot, Sindh at a total cost of Rs966.00 million.

The meeting approved a project titled Training and Support of Levy Forces in FATA at a modified cost of Rs558.891 million. The objective of the project is to build essential infrastructure, training, transport and communication facility enabling law enforcing agencies to effectively discharge their law and order duties. Ecnec approved the Ministry of Special Initiatives Clean Drinking Water Initiatives’ (CDWI) Project, second revised PC-I at a total cost of Rs999.541 million, stipulating that payments to the contractors be made on verification from provincial governments and operation and maintenance cost be met by the federal government. The project covers installation of nation wide filtration plants at district and tehsil levels.

The meeting conditionally approved the Ministry of Interior’s project titled Procurement/Installation of Non-intrusive Vehicle X-Ray Inspection System (NVIS) at a total cost of Rs1000.34 million including FEC. The project is designed for procurement/installation of non-intrusive x-ray inspection system to improve law enforcement agencies’ capabilities to scan high volumes of vehicles and detect contraband cargos in normal flow of traffic. It, however, advised the planning commission to undertake further technical study of project feasibility, FBR component for duties/taxes be incorporated, and it be sent to ECNEC for confirmation of its conditional approval by circulation.

 

[Neo]

KSE crosses 7,000 points on institutional support ​

Tuesday, March 31, 2009

KARACHI: Ignoring the fast deteriorating law & order situation in the country again on Monday, the Karachi bourse easily breached through 7,000 points psychological level on Monday on aggressive institutional buying.

The KSE 100-share Index rose by another 3.11 per cent or 211.35 points and closed at 7,017.81 points.

This morning, market opened above 7,000 points level and managed to maintain above this psychological level successfully, it was observed.

Analysts said that the massive institutional buying amid strong stocks’ fundamentals managed to minimize the intensity of fast worsening law & order situation in the country.

The terrorist attack on police training centre in Lahore about 7:30 in the morning, which remained lasted till late noon hours, could have derailed market, but immense institutional buying on corrective measure in the local economy inflated stocks values to notable levels.

The trading was very much similar to the weekend session, as market moved aggressively up while operation against anti-terrorist activities in Lahore was in progress, which took over two-dozen lives and injured another 100 people too.

On last Friday also, marked had exhibited excellent performance despite of a powerful suicide blast in a mosque in Khyber Agency, which had taken more than 50 lives and injured another 150 peopled.

Ahsan Mehanti at Shahzad Chamdia Securities said that the news of arrangement of Rs80 billion Term Finance Certificates (TFCs) for Independent Power Projects (IPPs) and oil companies to address the threatening ‘circular debt’ issue to the local economy; and President Obama announcement of giving $1.5 billion per annum assistance to Pakistan for the next five years together helped market recovering on fast pace.

Moreover, expectation of cut in discount rate, IMF disbursement of $840 million by the end of March and expectations of removal of United States traffic on textile exports from Pakistan played catalyst role for bullish activity in the market despite the terrorist activities in Lahore, he added.

On the political front, the lifting of governor rule in Punjab also played equally important role in restoring ‘positive sentiments’ to this scale, said Hasnain Asghar Ali at Aziz Fidahusein.

The parallel running junior 30-Index gained another 3.09 per cent or 226.91 points and finished at 7,567.24 points.

The day turnover jumped up by 44 per cent to 330.190 million shares in ready market from 229.616 million shares changed hands on the weekend. Similarly, the future market also generated a turnover of 370 thousand as compared to mere 500 shares on last Friday.

Accordingly, the overall market capitalisation surged by Rs60 billion and stands at Rs2,103 billion.

The foreign portfolio investors, however, disinvested another $5.3 million from local bourses in this session too, according to NCCPL.

Ali added that positive political developments over the weekend were faced with extremely condemnable incident in Lahore, thus defusing many who were all prepared to enter the arena with a bang.

The benchmark witnessed an altered bull run, as despite the act of terrorism the main board stocks attracted buying spree initiated mainly by the regular market participants, including corporate players.

Out of total 384 actives, 243 stocks advanced against 128 declined, while the value of 13 remained unchanged.

Highest volumes were witnessed in Pak.PTA at 31.802 million closing at Rs3.07 with a gain of 27 paisa, followed by WorldCall Telecom at 22.939 million closing at Rs3.06 with a gain of 45 paisa, National Bank at 13.939 million closing at Rs91.85 with a gain of Rs1.54, Maple Leaf Cement at 11.969 million closing at Rs5.01 with a gain of one paisa, and Fauji Fertilizer Bin Qasim at 11.869 million closing at Rs17.54 with a gain of 52 paisa.

 

[Neo]

‘Remittances to be increased to $15 billion’​

KARACHI: Federal Minister for Overseas Pakistanis, Dr Farooq Sattar said on Monday that incentives would be offered to overseas Pakistanis for increasing remittances from $7 billion to $15 billion. The minister expressed these views while at launching ceremony of book Marhaba Musafir organised by Karachi Chamber of Commerce and Industry at a local hotel.

Dr Farooq Sattar said that $15 billion remittances target has been set for the fiscal year 2009-10, as compared to $ 7.5 billion in the year 2008-09. “Despite, unfavorable environment and tough competition we are hopeful to achieve this target.”

Minister said that “a meeting with governor State Bank of Pakistan, Syed Saleem Raza will be held next month, in which a mechanism will be composed to achieve this increased remittance target.” He said Overseas Pakistanis investors would be attracted through incentives to invest in housing and textile sectors in the big cities like Karachi and Lahore. The availability of ideal atmosphere is necessary for the foreign investment. District governments can play a vital role to create opportunities of investment in the housing sector.

Lamenting on the current worse business and weak economic condition of the country, he said that KESC has played havoc in making business environment worse and has been a major problem for the local people and in the way of progress and prosperity. He was of the view that decision of privatisation of the KESC was good, but the KESC according to its commitment did not focus on investment and kept its full attention to recover money from the people by enhancing electricity bills and frequently increasing power tariff.

“After privatisation of the KESC the government had to regulate it but that did not happened and now its performance has become worst ever,” the minister claimed. If people initiate any peaceful protest against the KESC management, MQM will surely support the people’s campaign, he claimed. Earlier, president KCCI, Anjum Nisar briefing minister said that due to unfavorable environment, Pakistan has been left behind many nations as Mexico, Bangladesh, Philippine and Vietnam have received more remittance yet than Pakistan.

 

[Neo]

IMF approves $847.1 million loan for Pakistan​

KARACHI (March 31 2009): The International Monetary Fund said on Monday it approved the release of $847.1 million for Pakistan after completing a review of the countrys economic performance. The IMF said Pakistans economy was gradually recovering from the macroeconomic and external imbalances of 2007 and 2008, and a program aimed at restoring financial stability while protecting the poor was "firmly on track."

Pakistani ambassador to the United States Hussain Haqqani called on the vice president of World Bank and thanked WB support for Pakistan, the channel added.

 

[Neo]

Pakistan losing $6 billion annually in war on terror: SCCI​

LAHORE (March 31 2009): Pakistans economy is losing $6billion a year to counter terrorism, while budgetary allocations for this purpose are affecting the pace of development. The VP, SAARC Chamber of Commerce and Industry (SCCI) Pakistan Chapter and founder Chairman, Pak-US Business Council, Iftikhar Ali Malik said.

Strongly condemning the terrorist attack on Police Training Centre, Manawan on Monday, he said Pakistan paid hugely in terms of human, social and economic cost for the war on terror and so far has suffered s tremendous financial loss of $68 billion, since the turmoil in Afghanistan.

He said that Pakistans participation in the war on terror has led to unemployment and displacement of people leading to an increase in the crime rate. Malik also said that FPCCI, other chambers and entire business community across the country stand united with the democratically elected government in the wake of Indian threats following Mumbai incident. Pakistan is a peace loving country and its democratically elected leadership, always condemned the menace of terrorism in the world, he said.

Further, Pakistan is still victim of terrorism and will continue its efforts to stamp out this menace, he said adding that Pakistani leadership is always ready to negotiate with India for the settlement of all outstanding disputes and issues through parleys. On behalf of the entire business community, he categorically assured the government that traders would place their resources at the disposal of the government against any threat and to purge the country of menace of terrorism.

 

[Neo]

Pakistan seeking $30 bln from friends ​

ISLAMABAD, March 31 (Xinhua) -- Pakistan will seek a total of 30 billion U.S. dollars from its friends at a meeting scheduled to be held in Tokyo, private TV channel DAWN NEWS reported on Tuesday.

It will include 22 billions in aid and 8 billions in foreign direct investment, the DAWN NEWS quoted officials as saying.

The meeting is slated to be held in Tokyo in April and would be attended by leaders and representatives from several Asian and Western countries, in a bid to secure their support for the economic development programs in Pakistan, according to official Associated Press of Pakistan.

 

[ajpirzada]

ADB estimates Pakistan’s growth at 2.8% in 2008-09

By Sajid Chaudhry

islamabad: Asian Development Outlook (ADO) 2009 has projected Pakistan's economic growth at 2.8 percent for current fiscal year 2008-09 due to the impact of the global slowdown, tight demand management policies and the power deficit.

ADB's Country Director, Rune Stroem has termed fall in growth as "warning bells on for Pakistan" and has said growth less than 3 percent is concern for us as well as any body else, growth less than 3 percent has its social implications as un-employment being major impact.

Addressing a media briefing at Pakistan Resident Mission along with country economist Safdar Parvez, Rune Stroem said Pakistan has been fortunate being not affected, as it has not yet adopted such sophisticated financial instruments that had led to financial crisis in US and around the globe.

However, he was of the view that global economic slowdown would definitely affect Pakistan's economy in terms of negative impact on exports, reduced foreign investment and remittances in months to come. Mr Stroem said its ripe time for Pakistan to learn the global financial crisis and prepare its own second generation capital and financial market reforms having effective checks on instruments to be introduced.

Pakistan's economic growth is not expected to fall further as terrorist attacks, militancy, political instability as well as power and gas shortages have been kept in view while finalising the growth estimates, Safdar Parvez informed.

ADB is extending financial help to Pakistan for finalising second generation financial sector reforms and would also help to put in place effective regulatory mechanism to save its financial sector from crisis similar to global crisis, Rune added.

Growth in agriculture will improve with respect to that in the last fiscal year, but will remain moderate on account of high input costs including electricity, fertilizers, pesticides and pest attacks.

The sugarcane crop has been disappointing and the cotton crop has been short of target. However, the wheat crop is projected to be very good because of improved water availability and a 52 percent increase in the support price for farmers, announced in September 2008.

Energy shortages, the law and order situation and capacity and input constraints caused by higher import prices from the large depreciation of the Pakistan rupee will lower industrial performance.

Growth in services, too, will moderate because of the knock-on effect of the lower growth momentum in the commodity-producing sectors on wholesale and retail trade. The performance of the financial sub-sector could be affected by the increase in non-performing loans this year.

The fiscal deficit is expected to decline in FY2009, as the government removes or reduces subsidies and rationalises development expenditure. With the fiscal deficit targeted to fall to 4.3 percent of GDP, the government has already fully eliminated the subsidy on petroleum products, and is undertaking a phased reduction in the electricity subsidy, with the target to remove this subsidy too by the end of FY2009.

A reprioritisation of projects is expected to lead to a slashing of the development budget by over Rs 100 billion for FY2009. The fiscal deficit in the first half of the fiscal year of 1.9 percent of GDP suggests that the authorities are on course on meeting the fiscal deficit target for the full year. The economy needs to develop infrastructure and invest in health and education. Deficit spending can be carried out judiciously and it need not be inflationary because the economy is very far from full employment.

Although global food and oil prices are on the decline, the increase in the wheat support price and the reduction in subsidies, along with currency depreciation, will together keep up the inflationary pressure in FY2009, resulting in an average consumer price inflation of around 20.0 percent. Despite the fact that inflation pressure declined from November 2008 to January 2009, the consumer price index, food inflation and core inflation were still all over 20percent on a year-on-year basis.

Despite growth in exports, the current account deficit jumped to $7.3 billion in first half of 2009 and came in 20 percent higher than in the same period in the previous fiscal year. A comparison of the first 7 months reveals that the current account deficit in FY2009 was only 1.5 percent above the level in FY2008. Imports would need to continue to compress significantly in the second half of FY2009 to improve the current account balance. The current account deficit is projected to go down to 6.0 percent of GDP in FY2009. Workers' remittances would need to be sustained to achieve the projected reduction in the current account imbalance. The current account gap remains a major challenge that was exacerbated by the deterioration in the financial account in the 7 months of FY2009. This imbalance imposes a balance-of-payments constraint to sustainable growth in Pakistan.

Daily Times - Leading News Resource of Pakistan

 

[Neo]

Global slowdown, energy deficit push Pak growth down: ADB ​

Wednesday, April 01, 2009

ISLAMABAD: The Asian Development Bank (ADB) has projected lowered gross domestic product (GDP) growth of 2.8 per cent for Pakistan in the current fiscal year owing to the global downturn, tight fiscal and monetary policies, energy deficit as well as growing militancy in various parts of the country.

“The GDP growth rate below 3 per cent gives ‘warning signals’ to Islamabad which will have direct and indirect negative consequences. Other aspects including growing militancy were also considered in the low GDP growth forecast,” ADB’s Country Director Rune Stroem said at the launch of Asian Development Outlook (ADO-2009) during a press conference, here on Tuesday. Flanked by ADB’s Chief Economist, Safdar Pervez, the country director quoted a survey conducted by the bank, saying that it was found that GDP growth of over 5 per cent posed balance of payments difficulties for Pakistan after a period of four or five years. “Pakistan’s economic vulnerability can increase owing to the global crisis for longer period,” he said and added that the country’s heavy reliance on external inflows also pinpointed structural weaknesses in the economy. He stressed that the weaknesses of the economy need to be overcome to avoid cycles and dependence on external inflows be reduced.

Answering a query about the impact of the global economic meltdown, he said Pakistan’s economy was not much sophisticated in terms of adopting new financial instruments which actually remained a positive thing for the country as it was largely saved from the negative impact of the global crisis.

The ADO 2009 states that the fiscal deficit was envisaged to fall in the wake of elimination of subsidies on power and fuel as well as reprioritisation of development expenditures but there were concerns in terms of achieving revenue collection target of Rs1,300 billion.

Inflation will remain around 20 per cent for 2008-09 while current account deficit will fall below 6 per cent of the GDP. Public debt to GDP ratio is bound to rise to 58.8 per cent mainly because of domestic debt in fiscal year 2008-09. “Pakistan needs a careful planning to upgrade industrialisation and achieve export-led growth in order to overcome its woes on the external account as currently the country is depending on growing remittances,” he added.

When ADB officials were asked about higher estimates of GDP growth in the range of 2.8 per cent compared to IMF’s projection of 2.5 per cent for the ongoing fiscal, Pervez replied that they inserted some new development while making projections as the circular debt related issue resolved which would help to increase economic activities and services sector would also show improvements in the fourth quarter of the ongoing fiscal year.

To another query about the social sector spending, the ADB high-ups said the country’s allocation was much less on education and health compared to the international standards. In 2008, a sharp deterioration in current account and fiscal balances, amid escalating inflation, led to the depletion of foreign reserves.

The immediate threat to the economic stability was overcome by a stabilization programme backed by the International Monetary Fund (IMF).

Beyond the immediate fiscal and monetary steps, the country needs a long-term strategy and action plan to transform, upgrade, and diversify the economy, in particular the manufacturing sector.

This is critical to sustain growth and generate jobs. Strengthening economic fundamentals, addressing the power and infrastructure gaps, and improving human development indicators are key components of a medium-term strategy to accelerate the process of structural change in the country. Reducing large imbalances is important, a responsive fiscal stance that addresses the need for building critical infrastructure and investing in health and education is also needed.

South Asia, as a region, will remain vulnerable to balance of payments pressure in the current international environment. Countries such as Bangladesh, Pakistan, Nepal and Sri Lanka, and Maldives all rely heavily on workers’ remittance to offset large trade deficits while their exports are concentrated in garments and textiles. These sources of foreign exchange may emerge as constraints in the period ahead.

 

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Pakistan seeks $30bn FoP aid for development projects ​

Wednesday, April 01, 2009

ISLAMABAD: Planning Commission Deputy Chairman Sardar Aseff Ahmed Ali said on Tuesday that the government would ask the Friends of Pakistan (FoP) forum in its next meeting in Tokyo to provide $30 billion for development projects over the next five to ten years.

“We will seek $22 billion in the shape of assistance, while $8 billion will be sought as foreign direct investment during the upcoming ministerial level meeting of FoP, in order to execute development projects,” the PC Deputy Chairman said while talking to reporters here on the sidelines of a three-day conference of the Pakistan Institute of Development Economics (PIDE).

He said that most of the development projects would be completed over the next five years, while a few of them would be completed in 10 years, adding that out of the total $22 billion assistance, Islamabad wanted to receive 20 to 25 per cent in shape of grants from the FoP.

“There is a connection between terrorism and the growing menace of poverty, and we are going to ask our western allies to provide us grants for combating poverty and improving social sector indicators,” he added.

He said that the country is facing a severe energy crisis and the government has decided to seek assistance from the FoP forum for construction of Diamer-Basha dam with estimated cost of $11.7 billion.

The Basha dam will be unbundled into civil work and installation of power plants, and the government will seek $6 billion from donors to accomplish the civil work. The government will have to provide $200 to $300 million from budgetary resources to initiate work on the Diamer-Basha dam from the next fiscal year.

He also said that Pakistan would seek $600 million assistance for human resource development by establishing technical and vocation institutions all over the country.

He said that security related projects would be additional to the project aid from FoP. He said that they were introducing a new concept of Alternate Development Vehicle by involving the corporate sector in order to reduce the project’s administration cost below 2 per cent, which might be the lowest all over the world.

To a query about securitization of remittances, he said that Pakistan would ask UAE and Saudi Arabia to provide $3.5 billion in advance in order to improve foreign currency reserves that will pave the way for upgrading credit ratings.

To another query about the government’s plan to cut down development spending in order to achieve the deficit target set by IMF, he said that the government had allocated Rs372 billion for the public sector development programme for the ongoing fiscal, but spending would be around Rs200 billion by June 30, 2009. This means that development spending would be cut down by Rs172 billion against the envisaged allocation of Rs372 billion for the federal share of PSDP in the ongoing fiscal year.

However, during the first day of the PIDE conference, John W Mellor on the topic of ‘Agriculture Development and Food Security,’ said that the global food crisis could be overcome by enhancing productivity of agriculture products. He also stressed upon the need to promote agriculture research and used extension services in order to achieve higher productivity.

Answering a query of Dr Talat about Pakistan’s government policy for subsidizing bio fuel, John W Mellor said that it could result into decreasing productivity because farmers would divert towards bio fuel at the cost of decreasing other agriculture products, resulting into food shortages in the country.

 

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IMF approves $847m after positive review ​

Wednesday, April 01, 2009

WASHINGTON: The International Monetary Fund (IMF) on Monday said it would lend roughly $847 million to Pakistan as part of an emergency loan to help support the country’s economic stabilisation programme.

The IMF said its board approved the payment after a first review of Pakistan’s economic performance under a programme supported by a $7.6 billion line of credit agreed late last year.

The 23-month Stand-By Arrangement (SBA) announced on November 24 was approved under the IMF’s fast-track Emergency Financing Mechanism procedures.

“Pakistan’s economy is gradually recovering from the macroeconomic and external imbalances of 2007-2008,” IMF deputy managing director Murilo Portugal, said in a statement. “Policy steps taken by the authorities under the SBA-supported stabilisation programme, which aims at restoring financial stability while protecting the poor, have been instrumental in this regard,” he said.

The IMF said the sharply deteriorating global economy had forced it to revise downward Pakistan’s near-term growth outlook. IMF’s mission chief for Pakistan Adnan Mazarei, said in a conference call that for the 2008-2009 fiscal year that begins in June, the growth forecast was slashed to 2.5 per cent from a prior estimate of 3.5 per cent.