Pakistan Economy - News & Updates

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Lucky-KDLB row puts $1 billion cement exports at stake ​

KARACHI (June 12 2009): Cement exporters fear losing their $1 billion markets world over, as the labourers, demanding employment and cess from the former, have detained a foreign ship at Karachi Port. According to sources M/v Bulk Arrow, which had arrived at Berth Number 25 of West Wharf around 11am Tuesday night, was awaiting loading that was denied by the workers of Karachi Dock Labour Board (KDLB) till filing of this report.

The stand-off surfaced when concerned authorities in the ministry and KPT despite repeated notices failed to pay heed to a longstanding dispute between KDLB and Lucky Cement, operator of a dedicated cement export facility at Karachi Port, with the former demanding employment and Rs 42 per ton cess and the latter denying the same on the contention that no manual work was needed at the automatically operated facility.

After heated debates the KDLB had filed a suit against Lucky Cement in the court of law which, according to sources, had ruled that the cement exporter would hire labourers from KDLB as per need, which Lucky Cement contends would never arise at the facility, where four automatic silos were installed to directly pump loose cargo into the ships.

"We have an automatic loading operation system in place that enables us to efficiently load 12,000 tons cement daily - no manual work is needed here," Abid Ganatra Director Finance Lucky Cement told Business Recorder. He said his company had installed four automatic silos with 25,000 tons total storage capacity at the berth at Rs one billion to enhance its cargo handling capacity.

But due to such activities, Pakistan, the cement export volume of which would touch $one billion this year, would lose its markets to its emerging world competitors, like India, Ganatra said.

"If the detention continues, international ship owners would stop sending their vessels to Pakistan, where port charges stand at 5 dollars as compared to a dollar-plus in India," he said. He claimed that the labourers' act was sheer contempt of court, which had ruled in favour of his firm. Moreover, Ganatra said in pursuance of an amicable solution to the dispute his company had sent letters to D.G and secretary ports and shipping along with KPT chief, but to no avail.

"We have also asked Jackson Police for protection as the labourers threatened to damage our infrastructure when we try to start loading," he added. Abdullah Dawood, General Secretary of KDLB CBA, was not available for comments, however, a KDLB spokesman told Business Recorder that as per 1973 Constitution only registered dockworkers can be employed for all sorts of loading/discharging work at Karachi Port.

"Despite clear constitutional provision they (Lucky Cement) are hiring 40 to 50 private labourers, who are inexperienced, he said. The ship would take 18,000 tons loose bulk cement from Pakistan to the Middle East.

 

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Economic Survey 2008-09: Highlights​

TEXT (June 12 2009):

1. GROWTH AND INVESTMENT: Real GDP grew by 2.0 percent in 2008-09 as against 4.1 percent last year and growth target of 4.5 percent. The modest growth of just 2.0 percent is shared between Commodity Producing Sector (CPS) (0.08 percentage points) and services sector (1.92 percentage points).

Within the CPS, agriculture contributed 1.0 percentage point or 50.1 percent to overall GOP growth (a significant increase from its contribution of only 5.0 percent last year) while negative performance of industry dragged growth lower by 0.92 percentage points or 46.1 percent to neutralise positive contribution of agriculture.

In the services sector major contributions to GOP growth came from transport, storage & communication (0.3 percentage points or 14.6 percent), wholesale & retail trade (0.7 percentage points or 27.1 percent) and social services (0.8 percentage points or 38.6 percent).

Agriculture sector has depicted a stellar growth of 4.7 percent as compared to 1.1 percent witnessed last year and target of 3.5 percent for the year. Major crops accounting for 33.4 percent of agricultural value added registered an impressive growth of 7.7 percent as against a negative growth of 6.4 percent last year and a target of 4.5 percent. The livestock sector grew by 3.7 percent in 2008- 09 as against 4.2 percent last year.

Output in the manufacturing sector contracted by 3.3 percent in 2008-09 as compared to expansion of 4.8 percent last year and target of 6.1 percent. Small and medium manufacturing sector maintained its healthy growth of last year at 7.5 percent. Large-scale manufacturing depicted contraction of 7.7 percent as against expansion of 4.0 percent in the last year and 5.5 percent target for the year. The massive contraction is because of acute energy outages, a weak security environment and political disruption in March 2009.

The services sector grew by 3.6 percent as against the target of 6.1 percent and by last year's actual growth of 6.6 percent. Value added in the wholesale and retail trade sector grew at 3.1 percent as compared to 5.3 percent last year and target for the year of 5.4 percent.

Finance and insurance sector registered negative growth of 1.2 percent in 2008-09. The performance of this sector shows that Pakistan's financial sector is integrated in the world economy and is feeling the heat of the crisis plaguing international financial markets. The Transport, Storage and Communication sub-sector depicted a sharp deceleration in growth to 2.9 percent in 2008-09 as compared to 5.7 percent of last year.

Pakistan's per capita real income has risen by 2.5 percent in 2008-09 as against 3.4 percent last year. Per capita income in dollar term rose from $1042 last year to $1046 in 2008-09, thereby showing marginal increase of 0.3 percent. Real private consumption rose by 5.2 percent as against negative growth of 1.3 percent attained last year.

However, gross fixed capital formation could not maintain its strong growth momentum and real fixed investment growth contracted by 6.9 percent as against the expansion of 3.8 percent in the last fiscal year. Total investment has declined from 22.5 percent of GDP in 2006-07 to 19.7 percent of GDP in 2008- 09. Fixed investment has decreased to 18,1 percent of GDP from 20.4 percent last year.

Private sector investment was decelerating persistently since 2004-05 and its ratio to GDP has declined from 15.7 percent in 2004-05 to 13.2 percent in 2008-09. Public sector investment to GDP ratio which has been depicting a consistent increase from 4.0 percent in 2002-03 to 5.6 percent in 2006-07, declined to 4.9 percent in 2008-09.

The national savings rate has declined to 14.4 percent of GOP in 2008-09 as against 13.5 percent of GDP last year. Domestic savings has also declined substantially from 16.3 percent of GDP in 2005-06 to 11.2 percent of GDP in 2008-09. The overall foreign investment during the first ten months (July-April) of the current fiscal year has declined by 42.7 percent and stood at $2.2 billion as against $3.9 billion in the comparable period of last year.

Foreign direct investment (private) showed some resilience and stood at $3205.4 million during the first ten months (July-April) of the current fiscal year as against $3719.1 million in the same period last year thereby showing a decline of 13.8 percent.

Private portfolio investment on the other hand showed a net outflow of $451.5 million as against a net inflow of $98.9 million during the comparable period of last year. US kept its distinction of being the largest investor in Pakistan with 23.2 percent stake in the FDI. Other big investors originated from Mauritius (10.0 percent), Singapore (7.7 percent), UK (6.9 percent), Switzerland (6.6 percent), UAE (5.3 percent) and Hong Kong (3.9 percent).

The communication sector (including Telecom) spearheaded the FDI inflows by accounting for 27.3 percent stake during July-April 2008-09 followed by financial business (22.4 percent), energy including oil & gas and power (22.7 percent), and trade (4.9 percent). The current wave of uncertainty in the global demand and economic activity in the country has a major backlash on FDI inflows.

2. AGRICULTURE: The agriculture growth this year is estimated at 4.7 percent as compared with 1.1 percent during 2007-08. Cotton production at 11,819,000 bates in 2008-09 has increased by 1.4 percent in comparison to 11655,000 bales of last year. Wheat production is estimated at 23.4 million tons in 2008-09 as against 20.9 million tons last year, showing an increase of 11.9 percent.

Rice production has increased from 5.6 million tons in 2007-08 to 6.9 million tons in 2008-09, showing a substantial increase of 24.9 percent. Sugarcane production has decreased by 21.7 percent in 2008-09 from 63.9 million tons in last year to 50.0 million tons in 2008-09.

Gram production at 760 thousand tons in 2008-09 has increased by 60.0 percent in comparison to 475 thousand of last year. Maize production has increased from 3605 thousand tons in 2007-08 to 4036 thousand tons in 2008-09, showing a increase of 11.9 percent.

As regards minor crops, the production of chillies, masoor and potatoes increased by 60.7 percent, 44.Spercent and 0.2 percent respectively .The chillies crop is mainly concentrated in Sindh where timely rain proved very beneficial. The production of mung, mash and onion decreased by 11.4percent, 20.8 percent and 4.6percent respectively.

The decrease in these crops is mainly due to reduction of area under such crops as the area of mung, mash and onion decreased by 6percent, 3.lpercent and 13.lpercent respectively. Agriculture credit disbursement of Rs 151.9 billion during July-March 2008-09 is higher by 9.6 percent, as compared to Rs 138.6 billion over last year.

The domestic production of fertilisers during the first nine months (July - March 2008-09) of the current fiscal year was up by 3.6 percent as compared with corresponding period last year. On the other hand, the import of fertiliser decreased by 51 percent, the off-take of fertiliser also decreased by 11.9 percent during the same period last year.

3. MANUFACTURING: Overall manufacturing posted a negative growth of 3.3 percent during the current fiscal year against the target of 6.1 percent and 4.8 percent of last year. Large-scale manufacturing witnessed a across the board decline of 7.7 percent during ongoing fiscal year against the growth rate of 5.2 percent last year.

Severe energy shortages, deterioration in domestic law and order situation, sharp depreciation m rupee vis-à-vis US dollar and most importantly, weak external demand on the back of global recession coupled with slowdown in domestic demand are responsible factors for sluggish performance of manufacturing sector.

Major items responsible for this negative trend in large scale manufacturing during the current financial year were vegetable ghee (8.2percent),cooking oil (3.Spercent), beverages(3.7percent), sugar (26.3percent),tea blended (0.Sopercent), Cotton yarn (0.3percent) & cotton cloth (0.3percent), petroleum products (9.2 percent), jeeps & cars (48.Opercent), deep freezer (17.7percent), refrigerator (12.2percent), TV sets (38.8percent), Bicycles (30.4percent), Buses (51.3percent), pig iron (12.4percent), upper leather (7.6percent), nitrogenous fertiliser (0.8percent). Production of a few items depicted increase in their production such as cigarettes (11.4percent), cotton (ginned) (1.4percent), liquids/syrups (1.7percent), phosphatic fertiliser (33.3percent), cement (4.7percent) and coke (51.7percent).

The mining and quarrying sector registered a growth of 1.3 percent during the current fiscal year against the target of 4.5 percent and 4.4 percent last year. Government of Pakistan privatised Hazara Phosphate Fertilisers Limited (HPFL) at Rs 1340.02 billion during current fiscal year.

4. FISCAL DEVELOPMENTS: The overall fiscal balance has recovered from a sizeable slippage of 2007-08 amidst substantial decline in revenues and elimination of some subsidies like on petroleum products. The tax to GDP ratio fluctuated in a narrow band of 10 to 11 percent for almost one decade. In the current fiscal year the potential risk exists of tax-to-GDP ratio below 10 percent of GDP for the first time in the last two decades.

In 2008-09 total revenue as percentage of GDP slightly recovered, due to a marginal improvement in non-tax revenues as percent of GDP. Total revenue is expected to reach at Rs 1910 billion, as compared to Rs 1499.5 billion during the 2007-08.

The gradual decline in excise duty is attributed to removal of its incidence on selected items. With excise comprising of 9 percent of total FBR revenues, Pakistan's tax revenue-to-GDP stood at around 9 percent of GDP during 2008-09. The indirect tax-to-GDP ratio stood at around 5 percent, and direct tax-to-GDP ratio at around 4 percent during 2008-09.

The FBR revenue collection for the fiscal year 2008-09 was targeted at Rs 1250 billion at the time of presentation of the Federal Budget 2008-09. Tax collection during the first ten months (July-April) of the current fiscal year amounted to Rs 898.6 billion, which is 17.7 percent higher than the net collection of Rs 763.6 billion in the corresponding period of last year. The net and gross collections have increased by 17.7 and 17.1 percent respectively.

Federal excise duty collections registered a vibrant growth of 27.6 percent. On the other hand 47 percent growth in sales tax on domestic economic activity has helped it to grow overall by 22.2 percent. When viewed in the backdrop of 23 percent growth in national income, the growth of 16.9 percent in direct tax looks dismal.

The FBR tax collection to GDP ratio is likely to deteriorate around 9 percent of GDP as against the target of bringing it in to the vicinity of 10 percent of GDP. Apart from FBR revenue, the total tax revenue growth also lagged behind the growth in nominal GOP, as it exhibits a decline in tax GDP ratio from 10.3 percent in 2007-08 to around 10 percent in 2008-09.

The budgeted total expenditure for the fiscal year 2008-09 was Rs 2391 billion, which is 4.9 percent higher than the last year's revised estimate. Development expenditure (after adjusting for net lending) was targeted at Rs 396 billion in 2008-09 which is up by 7 percent than last year. On the basis of revenue and expenditure projections, the overall fiscal deficit is estimated at Rs 562 billion or 4.3 percent of GOP as against 7.4 percent last year.

On the other hand current expenditures were envisaged to remain more or less stagnant at Rs 1876 billion. The stake of federal government in the current expenditure was to the extent of Rs 1359 billion and the remaining Rs 517 billion were earmarked for provincial governments.

Interest payments surpassed their budgeted level by a significant margin. A sum of Rs 557 billion was budgeted for interest payments in 2008-09. The year is likely to end with interest payments of Rs 618 billion which are higher by Rs 61 billion over budgeted amount.

5. MONEY AND CREDIT: During 2007-08, the SBP continued with tight monetary policy stance, thrice raising the discount rate and increased the Cash Reserve requirement (CRR) and Statutory Liquidity Requirement (SLR). During July-May 9, 2008-09, money supply (M2) decline to 4.59 percent against 8.96 percent last year.

Net Domestic Assets (NDA) was limited to just Rs 442.1 billion as compared to Rs 655.4 billion in FY08. During FY09 the slow expansion in private sector credit has led to the slower growth in NDA of the banking system. This is shared both by NDA of SBP and the scheduled banks.

Net Foreign Assets (NFA) of the banking system recorded a decline of over Rs 227.1 billion during the first ten months of the current fiscal year to May 9th. Government borrowing from the central bank has been dampened since December 2008 in line with the target set under the macroeconomic stabilisation programme as part of the IMF Stand-By Arrangement.

Government's budgetary borrowing from the banking system decreased by Rs 339.9 billion during July-May FY09 against an increase of Rs 360.4 billion in the corresponding period of FY08. Credit to private sector grew by Rs 21.8 billion during July-May FY09 as compared to Rs 369.8 billion during the corresponding period last year. The weighted average lending rate has risen by 210 bps during the same period accompanied by 180 bps addition in the deposit rates.

During July-December, 208 Khushali Bank, disbursed loans amounting Rs 1,9 billion (December 2008) as compared to Rs 2.6 billion in the same period last year. The share of all other microfinance banks in loan disbursement increased to Rs 2.6 billion (December 2008) from Rs 2.3 billion in July-March FY08. Microfinance Institutions have also disbursed amounting to Rs 10.4 billion as compared to Rs 12.9 billion.

6. CAPITAL MARKETS: During the outgoing fiscal year 2008-09, the benchmark stock exchange KSE-100 index demonstrated acute volatility owing to fluctuating outlook on political, macroeconomic and global grounds. The index closed at 7,367.6 points on May 29, 2009, down by 4,921.4 points (or 40 percent) from the end June position of the last year.

The KSE management and Securities and Exchange Commission of Pakistan (SECP) together took a number of regulatory actions to mitigate the potential technical risks confronting the equity markets, the most prominent being the imposition of price floor during August 27, 2008 to December 12, 2008.

Aggregate Market Capitalisation declined abruptly by Rs 1,621 billion, from Rs 3,777 billion in June 2008 to Rs 2,156 billion in May 2009. With no fresh merger and acquisition activity in the year 2008-09, the international investors remained keen to increase their ownership share. Foreign portfolio investment stood at a negative US $418.4 million during first nine months of the fiscal year 2008-09.

Dismal performance owing to a confluence of factors was exhibited by different sectors of the economy and the dull indicators left a weighty impact on the stock market activity during 2008-09.

The government carried out three government securities auction in the outgoing fiscal year and managed to issue Rs 48.9 billion of PIBs with 3&5 years due maturities amounting to Rs 16.2 billion, resulting in a surplus issuance of Rs 32.7 billion.

The Government of Pakistan issued its first 3-Year Ijara Sukuk Bond in the month of September 2008. So far, three auctions, one in each quarter, have been conducted by the SBP. Collectively, Rs 27.85 billion was mopped up against the total target of Rs 30 billion.

The National Savings Schemes (NSS) attracted Rs 173.3 billion in July-March 2008-09. Huge accruals were noticed in the case of Special Savings Certificates, Bahbood Savings Certificates, and Pensioners' Benefit Accounts. The deposit rates on all schemes offered under the NSS umbrella were revised in each quarter o the outgoing fiscal year. Three new floatation (corporate TFCs) were listed on KSE during the period under review.

Recent regulations by SECP that emphasise on increasing the minimum capital base and strict requirements for the classification of non-performing loans are anticipated to augment the strength of the Non Banking Finance Companies (NBFCs) sector. Significant progress has been made on capital market reforms, including adoption of international standards and market practices and the streamlining of regulatory infrastructure to enhance surveillance and enforcement.

7. INFLATION: The inflation rate as measured by the changes in Consumer Price Index (CPI) stood at 22.3 percent during the first ten months (July-April) of the current fiscal year, 2008-09, as against 10.3 percent in the comparable period of last year.

The food inflation is estimated at 26.6 percent and non-food 19.0 percent, against 15.0 percent and 6.8 percent in the corresponding period of last year. The Wholesale Price Index (WPI) during July-April, 2008-09 have increased by 21.4 percent, as against 13.7 percent of last year.

The Sensitive Price Indicator (SPI) has recorded an increase of 26.3 percent during July-April, 2008-09, as against 14.1 percent of last year. The increase in inflation rate during the current year 2008-09 is attributable to the increase in food price inflation which has been due to increase in prices of wheat, wheat flour, sugar, milk, poultry, meat, fresh vegetables and fruits.

8. TRADE & PAYMENTS: Overall exports recorded a negative growth of 3.0 percent during the first ten months (July-April) o the current fiscal year against positive growth of 10.2 percent in the same period of last year. ln absolute terms, exports have decreased from $15,222.9 million to $14762.2 million in the period.

Imports during the first ten months (July-April) of the current fiscal year (2008-09) decline by 9.8 percent compared with the same period of last year, reaching to $28.92 billion. Import compression measures lowering domestic demand coupled with massive fall in international oil prices have started paying dividends and imports witnessed slowdown. Beside that depreciation of rupee had also played a significant role for lower imports during current fiscal year.

Imports of the petroleum group registered declining growth of 7.6 percent and reached to $8012.7 million. The decline in imports of the petroleum group has been due to massive fall in oil prices in the international market. The imports of telecom decline by 54.8 percent during July-April 2008-09. This is followed by imports of consumer durables group which exhibits negative growth of 16.4 percent~ Petroleum group, Raw Materials and food groups witnessed a negative growth of 7.6 percent, 5.2 percent and 3.1 percent respectively. Import of machinery remained the only group which showed a nominal growth of 0.5 percent during July-April 2008-09.

According to data release by SBP, Trade deficit decelerated by 12.3 percent during July-April 2008-09 Pakistan's current account deficit (CAD) moved back o US $8.5 billion during Jul-Apr Fiscal Year 2008 09 against US $11.2 billion in the comparable period of last year, showing a decline of 23.5 percent.

In the month of February 2009, the current account witnessed a surplus of $128 million which is first monthly surplus since July 2007. This improvement contributed by deceleration in import growth due to lower imports in terms of quantity in the back of import compression measures and depreciation in rupee along with massive decrease in imports prices. Increase in workers remittance and reduction in services account deficit leads to improvement of invisible account.

Services account deficit shrank by 41.3 percent during Jul-April Fiscal Year 2008-09 to reach $3. billion. Financial account contracts from $6,224 million to $3,476 million during July-April 2008-09 against corresponding period last year.

Pakistan has witnessed pressure on ER during July-October 2008-09 when rupee depreciated by 16.3 percent. With signing of Standby arrangements with the IMF, the rupee got back some of its lost value and with substantial import compression, improvement in overall external balance including revival of external inflows from abroad the exchange rate havoured around Rs 80.50 during April 2009.

Worker remittances amounted to $6355.6 million in July-April 2008-09 as against $5319.1 in corresponding period last year, thereby showing an increase of 19.5 percent. Pakistan's total liquid foreign exchange reserves amounted to $11.6 billion by the end of May 2009.Of which, reserves held by State Bank of Pakistan stood at $8.28 billion and by banks stood at 3.32 billion.

9. EXTERNAL AND DOMESTIC DEBT: In relative terms, EDI as percentage of GDP increased from 28.1 percent at end-June 2008 to 30.2 percent by end-March 2009- an increase of 2.1 percentage points. This is the highest ever rise in a single year for almost one decade. A significantly depressed economic growth and massive depreciation of rupee against dollar partially explains this increase in EDL as a percentage of GDP.

Given the severity of the crisis in international debt capital markets, and hesitance with respect to investor confidence, Pakistan has not issued any new instruments in 2008-09.

Government of Pakistan successfully repaid the maturing $500 million Eurobond as well as $17 million on account of interest payments. This successful payment laid to rest any fears of Pakistan debt repayment capacity, and shored up investor confidence about Pakistan's ability to successfully manage its outstanding external debt obligations.

Total public debt increased by Rs 1367 billion in the first nine months of 2008-09, reaching a total outstanding amount of Rs 7268 billion; an increase of 23.2 percent in nominal terms. The increase in total public debt is shared between rupee and foreign currency debt in the ratio of 40:60.

The rise in foreign currency debt is mainly because of massive depreciation of the Pak rupee in the first quarter of the fiscal year. As a percentage of GDP, total public debt has decreased to 55.5 percent, a significant reduction from the previous year but still less than the required reduction of 2.5 percent as prescribed by the Fiscal Responsibility and Debt Limitation Act 2005.

On the internal front, borrowing from the State Bank of Pakistan continues to fuel increases not only in domestic inflation but also adding to the short-run domestic debt. Net zero borrowing from the SBP at the end of every quarter put restraint on the government's borrowing appetite from the SBP and the government successfully met this target in the last two quarters (October-March). The total domestic debt is positioned at Rs 3758 billion at end-March 2009 which implies net addition of Rs 484 billion in the nine months of the current fiscal year.

10. EDUCATION: Education is extensively regarded as a route to economic prosperity being the key to scientific and technological advancement. Hence, it plays a pivotal role in human capital formation and a necessary tool for sustainable socio-economic growth. Education also combats unemployment, confirms sound foundation of social equity, awareness, tolerance, self esteem and spread of political socialisation and cultural vitality.

The overall literacy rate (10 years & above) which was 55 percent in 2006-07 has increased to 56 percent in 2007-08, indicating 1.8 percent increase over the same period last year.

Male literacy rate (10 years & above) increased from 67 percent in 2006-07 to 69 percent in 2007-08 while it increased from 42 to 44 percent for female during the same period. Literacy remains higher in urban areas (7lpercent) than in rural areas (49percent) during 2007-08.

Province wise literacy data of PSLM (2007-08) shows Punjab to be on the top (59 percent) followed by Sindh (56 percent), NWFP (49 percent) and Balochistan (46 percent). According to the PSLM Survey data 2007-08, the overall school attendance (age 10 years and above) is S8percent (7lpercent for male and 46percent for female) in 2007-08 as compared to S7percent (69percent for male and 44percent for female) in 2006-07.

According to the Ministry of Education, there are currently 227,243 institutions in the country. The overall enrolment is recorded at 34.49 million with teaching staff of 1.27 million.

11. HEALTH AND NUTRITION: At present, there are 948 hospitals, 4794 dispensaries, 5310 basic health units and 908 maternity and child health centres in Pakistan. With availability of 133.956 thousands doctors, 9.012 thousands dentists, 65.387 thousands nurses and 103.037 thousands hospital beds in the country by 2008-09, the population and health facilities ratio works out at 1212 persons per doctors, 18010 persons per dentist, 2400 persons per nurse and 1575 persons per hospital bed which are compared well with the other developing countries.

During 2008-09, 35 basic health units and 13 rural health centres have been constructed. While 40 rural health centres and 850 basic health units have been upgraded. Some 4500 doctors, 400 dentists, 3200 nurses and 5000 paramedics have completed their academic courses and 4300 new beds have been added in the hospitals.

Some 96 thousands Lady Health Workers (LHWS) have been trained and deployed mostly in the rural areas. Moreover, some 8 million children have been immunised and 24 million packets of ORS distributed.

Various health programmes with a special focus on major public health problems have been carried out. These include cancer treatment, AIDS prevention and Malaria Control Programme. The total outlay on health is budgeted at Rs 74.0 billion (Rs 33.0 billion development and Rs 41.10 billion current expenditure) which is equivalent to 0.5 percent of GNP.

12. POPULATION, LABOUR FORCE AND EMPLOYMENT: The population of Pakistan is 163.76 in 2008-09. At the existing trend, the total population will reach 167 million by the year 2010 and 194 million by 2020 (NIPS). The life expectancy in Pakistan is 64.9 years.

About 2.72 million labour force is estimated as un-employed in 2008 with unemployment rate of 5.20 percent. Agriculture remains the dominant source of employment in Pakistan. The share of agriculture in employment has increased from 43.61 percent in 2006-07 to 44.6 percent by the year 2007-08 followed by manufacturing (12.99 percent), trade (14.6 percent), services (13.7percent).

To generate employment the government has started Skill Development Councils in order to meet the diversified training needs of the industrial and commercial sectors. SME Bank has financed 7,814 Small and Medium Enterprises, disbursing loans amounting to Rs 7,936 million to 54,698 beneficiaries in the country.

13. POVERTY: Economic growth has slowed down considerably during the last three years. The industry and construction sectors have contracted due to the domestic slowdown and energy shortage and also due to global recession. Thus job absorbing capacity of the economy has shrunk.

Based on the Federal Bureau of Statistics' PSLM data, the Center for Poverty Reduction and Social Policy Development (CPRSPD), Planning and Development Division estimated a sharp decline in the headcount poverty ratio for 2007-08. However, these findings appear to contradict other assessments conducted subsequently, and which better reflect global and domestic price developments after June 2008.
The Report of a UN Inter Agency Assessment Mission fielded during June-July 2008 found that food security in Pakistan in 2007-08 had significantly worsened as a result of food price hike. The total number of households falling into this category was estimated at 7 million.

The survey further indicates that more than 40 percent of households reported no change in income in 2008 since the year before. Forty five percent of the population working as employees witnessed decrease in their real wages. The Report shows an increase in the share of severely food insecure population, from 23 percent in 2005-06 to 28 percent in 2008. The Planning Commission's constituted Panel of Economists in its Interim Report based on 2004-05 poverty head count number of 23.9 percent suggested an increase of around 6 points in poverty incidence for the year 2008-09. Similarly, the Task Force on Food Security based on the World Bank estimates of poverty head count ratio of 29.2 percent in 2004-05 estimated that poverty head count increased to 33.8 percent in 2007-08 and 36.1 percent in 2008-09 or about 62 million people in 2008- 09 were below the poverty line.

The average projected GDP growth in developing countries in 2009 is now only about a quarter of what was expected before the financial turmoil intensified into a full-blown crisis in the latter half of 2008 and a fifth of that achieved in the period of strong growth up to 2007.

14. TRANSPORT AND COMMUNICATION: Pakistan has a road network covering 258,350 kilometers including 176,589 KM of high type roads and 81,761 KM of low type roads. During the out-going fiscal year, the length of the high typed road network increased by 1.3 percent but the length of the low type road network declined by 2.7 percent because most of low type roads have been converted to high type roads. Road density at present is 0.32km/km2. Karachi Port Trust handled a total of 21.4 million tons of cargo during current fiscal year, depicting a growth rate of 44.3 percent.

Port Qasim Authority handled 18.01 million tons cargo during the current financial year 2008-09, depicting a shortfall of 9percent over Jul 07- Mar 08 owing to global economic crisis.

Pakistan National Shipping Corporation (PNSC) lifted 5762.2 million tons of liquid cargo and 865.0 million tons of dry cargo during the current fiscal year. PIA international passenger traffic, excluding Hajj, registered an increase of 3.5 percent from 3,069,717 passengers during 2008 over 2,964,830 passengers last year despite the seat (capacity) reduction of 2.3 percent. On domestic routes passenger traffic registered an increase of 3.6 percent from 2,239,815 passengers during 2008 over 2,160,589 passengers last year despite the seat (capacity) reduction of 7.4 percent.

Telecom sector of Pakistan exhibited positive but slow growth in terms of revenue, subscribers and tele-density. Total tele-density reached 60.6percent during the current year. Cellular Market added 3,422,599 subscribers with average of 0.3 million per month and total subscribers reached 91.4 million. Currently number of cities/towns/villages covered stands at 10,001 while 26,300 cell sites were installed by all cellular operators.

Total fixed line subscribers in Pakistan stood at a total of 3.7 million as of March, 2009, yielding total tele-density of 2.3percent. Today there are 384,187 fixed, mobile and WLL payphones available across the country. There are currently 267,180 broadband subscribers showing almost 59percent growth in 6 months time.

15. ENERGY:

Crude Oil: Production of crude oil per day has decrease to 66,531 barrels during July-March 2008 09 from 70,165 barrels per day during the same period last year, showing a decrease of 5.2 percent.

On average, the transport sector consumes 51.6 percent of the petroleum products, followed by power sector (33.1 percent), industry (10.3 percent), household (1.7 percent), other government (2.1 percent), and agriculture (1.1 percent) during last 10 years ie 1998-99 to 2007-08.

Natural Gas: The average production of natural gas per day stood at 3,986.5 million cubic feet during July-March, 2008-09, as compared to 3,965.9 million cubic feet over the same period last year, showing an increase of 0.5 percent. On average, the power sector consumes 37.2 percent of gas, followed by industrial sector (20.4 percent), fertiliser (19.8 percent), household (16.8 percent), Transport (2.0), commercial sector (2.7 percent) and cement (1.0 percent) during.

Electricity: The total installed generation capacity has increased to 19754 MW during July-March 200809 from 19566 MW during the same period last year, showing a marginal increase (1.0 percent). Total installed capacity of WAPDA stood at 11,454 MW during July-March 2008-09 of which, hydel accounts for 57.2 percent or 6,555 MW, thermal accounts for 42.8 percent or 4899 MW. The number of villages electrified increased to 133,463 by March 2009 from 126,296 5by March 2009, showing an increase of 5.7 percent.

CNG: Presently, some 2,700 CNG stations are operating in the country. By March 200 about 2.0 million vehicles were converted to CNG as compared to 1.70 million vehicles during the same period last year, showing an increase of 17.6 percent. With these developments Pakistan has now become the largest CNG using country.

Environment: Government of Pakistan has declared 2009 as the National Year of Environment. In this regard the current year was kicked off with a Regional level workshop on Climate Change, which was inaugurated by the Prime Minister of Pakistan.

The PRSP II released in February 2009, has aligned itself with Millennium Development Goal 7, which is specific to environmental sustainability. Its targets include; integration of the principles of sustainable development into country policies and programmes and reversing the loss of environmental resources, such as including: biodiversity conservation, climate change mitigation and adaptation, phasing out ozone depletion substances; sustainable access to safe drinking water, sanitation and hygiene; controlling outdoor and indoor air pollution, reduction of vulnerability to natural disasters, and significant improvement in the lives of squatter settlement dwellers eg by providing access to secure tenure.

Pakistan has become the largest user of Compressed Natural Gas (CNG) in the world, as per the statistics issued by the International Association of Natural Gas Vehicles (IANGV). Presently, more than 2 million vehicles are using CNG as fuel and 2,760 CNG stations are operational in different parts of the country (as on April 2009).

The Ministry in collaboration with UNICEF, Water & Sanitation Programme (World Bank), Water Aid, Rural Support Programme Network (RSPN) etc, launched awareness and training programmes in the year 2008, the International Year of Sanitation (IYS 2008).

It is estimated that the country's forest area stood at 5.3 percent during 2007-08. The President of Pakistan launched a Mass Afforestation Programme on December 22, 2008. This programme will be spread over a period of five years and shall largely be sponsored by private entrepreneurs for planting trees on state and other suitable lands.

The Government in collaboration with various concerned organisations has recently initiated the Technical Advisory Panel (TAP) on Climate Change. The official launch of the TAP was held on February 15, 2008.

 

[Neo]

Forex reserves decline to $11.514 billion​

KARACHI: The country's foreign exchange reserves decreased to $11.514 billion on the week ending on June 6, 2009 as compared with $11.524 billion previous week, data released by the State Bank of Pakistan showed on Thursday. The total reserves witnessed a decrease of $10 million during the last week. The reserves held by the central bank witnessed an increase of $16 million as the reserves reached to $8.200 billion, as compared to $8.814 billion last week. However, the reserves held by banks (other than SBP) showed a decline of $25 million to depict $3.314 billion as compared with last week's number of $3.339 billion last week.

 

[muse]

Free Money and Inflation for everyone- up, up and away - you don't have to produce value, it's free money time and back in the pockets of international institutions
Does Benazir have any free money for me?



Rs 2.2 trillion federal budget today

* Budget deficit estimated at Rs 724bn, includes non-development expenditures of Rs 1.55 trillion, PSDP worth Rs 621bn, Rs 343bn for defence budget, debt servicing allocation of Rs 655bn
* Upto 25% raise in pensions expected, new taxes, duties worth Rs 100bn likely

By Sajid Chaudhry

ISLAMABAD: The Pakistan People’s Party-led coalition government’s will present a Rs 2.196 trillion-budget for the fiscal year 2009-10 in the National Assembly today (Saturday).

The consolidated budget for the federal and the four provincial governments has been estimated at Rs 2.9 trillion for the next fiscal year.

A special meeting of the federal cabinet under the prime minister is likely to approve the proposed budget in the morning, followed by its tabling in parliament in the afternoon.

Proposals: The proposed budget has an allocation of Rs 724 billion for debt servicing, funds for which will be financed through local and external borrowing.

Non-development expenditures are estimated at Rs 1.55 trillion, Rs 621 billion have been apportioned for the Public Sector Development Programme (PSDP) 2009-10 and the allocation for the defence budget is likely to be around Rs 343 billion.

The budget proposal estimates foreign and domestic debt servicing at Rs 655 billion, Rs 70 billion have been earmarked for the Benazir Income Support Programme (BISP), allocation for the rehabilitation of the internally displaced persons (IDPs) is likely to Rs 50 billion, while the Earthquake Reconstruction and Rehabilitation Authority (ERRA) is likely to get Rs 25 billion for the year 2009-10.

According to the government’s estimates, expenditures in the coming year will amount to Rs 745 billion.

Another proposal to be considered in today’s special cabinet meeting is a proposed increase in the salaries of government officials by 20 percent, or an alternate remedy of merging two ad-hoc relief allowances in the pay scales and than allowing the 20 percent increase.

Pension and taxes: According to another proposal included in the planned budget, government employees who retired before June 30, 1997, will get a 25 percent increase in their pension and those who retired on, or after July 1, 1997, will allowed an increase of 20 percent.

The tax collection target is likely to be set at between Rs 1.380 and Rs 1.390 trillion, with new taxes and duties amounting to around Rs 100 billion.

The existing petroleum development levy may be replaced by a Carbon tax of around Rs 6 to 12 per litre on petroleum, oil and lubricant products, likely to be imposed from July 1, 2009.

The government is also expected to announce the mergers and closures of numerous federal departments to bring the size of the federal government to an efficient level. Proposals have been finalised in this regard.

Two new taxes are to be imposed under the provincial legislation - 16 percent general sales tax is to be levied on 14 services sectors and 10 percent capital gains tax on real estate sector is also expected.

In the upcoming budget 2009-10, the federal government is likely to impose five to 10 percent duties on air conditioners, deep freezers and refrigerators, and around five percent on the import of and local sale of tea and coffee.

Two percent additional duty on cosmetics and perfumes, a 10 percent increase in the duty on cigarettes and a five percent additional duty on the import of cigarettes is also expected.

The government is also likely to tax the CNG business with the removal of the 16 percent subsidy on the import of CNG kits and equipment and may also likely withdraw the zero rating tax facility for the pesticides, stationery and dairy products sectors.

Withholding tax on cash withdrawal from bank accounts and a five percent duty on the registration of new cars are also likely to go.

The 16 percent GST on computer software and exclusion of some sectors from Presumptive Tax Regime (PTR) are also likely. Income tax exemptions for some sectors are to be withdrawn and income tax rates for higher income groups are expected to be increased to generate additional revenues.

 

[white_pawn]

US House passes bill to triple aid ​

WASHINGTON (June 13 2009): The US House of Representatives on Thursday approved tripling US aid to Pakistan to about $1.5 billion a year for each of the next five years in a key part of a strategy to combat extremism with economic and social development.

-- Pakistan not happy about some of conditions on aid

-- Congressman says no more 'blank cheques'

-- Lawmaker urges fast response to Pakistan situation

The bill also includes military aid with conditions that require the Obama administration to certify that Pakistan remains committed to combating terrorist groups - a provision that was criticised by the key US ally in South Asia. The $1.5 billion in annual funding includes money for Pakistani schools, the judicial system, parliament and law enforcement agencies.

The action came the same day that UN Secretary-General Ban Ki-moon appealed to major donors for more funding for Pakistan, saying it was at risk of a "spiralling secondary crisis" without more international aid. The bill, which includes $400 million in annual military aid for 2010-2013, also passed as Pakistan's military opened a second front against domestic Taliban militants who US officials fear could destabilise Pakistan.

Fighting in the Bannu district flared up on Thursday as the military was completing the last stages of an operation to clear Islamist fighters from the Swat valley, near Islamabad. "The current conditions in Pakistan underline the importance of moving urgently on this legislation," said Democratic Representative Chris Van Hollen. "This is the time to send a signal and initiate a policy of economic development in these difficult regions," he added.

Van Hollen's amendment to the legislation, which must still be harmonised with a similar bill in the US Senate, sets up so-called Reconstruction Opportunity Zones in border areas of Pakistan and Afghanistan, from which textiles and other items can be exported duty-free to the United States.

"Support in Congress for aid for Pakistan will strengthen the resolve of the Pakistani people and government in confronting violent extremists and terrorists," said Pakistan's ambassador in Washington, Husain Haqqani. He also said his government was unhappy about the conditions tied to some of the aid.

"Some conditional language that has been included in the aid bill is not conducive to promoting the objectives of counterterrorism co-operation," the ambassador said, adding that he hoped the Senate would remove those terms when they complete passage of the aid package. But Howard Berman, chairman of the House of Representatives Foreign Affairs Committee, said Congress was "simply asking Pakistan to follow through with the commitments it has already made."

"In the process, we lay down an important marker that Congress will no longer provide a 'blank check,'" he said in a statement. On Wednesday, Richard Holbrooke, the US envoy to Pakistan and Afghanistan told a news briefing he had noticed a dramatic improvement in Pakistan's attitude toward fighting Islamist extremists during his visit there last week.

 

[white_pawn]

Rs70 billion package for five export sectors​

By A Reporter
Saturday, 13 Jun, 2009

ISLAMABAD: The government has decided to allocate Rs70 billion package for the revival of five export sectors in the budget in the shape of reduced gas prices and incentives for value addition.

Gas prices for industries for the first six months of next fiscal year have already been reduced by 12 per cent, said Dr Asim Hussain, adviser to the prime minister for petroleum and natural resources.

He said that the total impact of this price reduction is estimated at Rs30 billion and it would help the industrial growth in next fiscal year.

He said that low gas prices would contribute significantly in reducing the cost of production for the manufacturing sector.

Meanwhile, sources in the finance ministry told Dawn that the next budget would carry a relief package for the revival of export industry and value addition amounting to Rs40 billion.

Finance ministry sources said that the new package would be applicable to the textile, surgical, sports, leather and the gems and jewellery sector.

The government has already declared the fiscal year 2010 as the ‘year of the industry’ after the industrial sector witnessed a 3.3 per cent decline during the current fiscal year and special attention will be focused on the revival of small and medium and the large industries.

The government has decided to provide relief to these sectors as they are not only the major foreign exchange earners but also the key employers in the country.

Industries are not only the main source of employment providers but are also engine of the growth, said an official of the commerce ministry adding that the country was under pressure from the WTO to withdraw the research and development (R&D) support to the textile sector.

The government believes that the package would enable the five sectors to become competitive in the international market. However, the officials said that the government was also taking measures to ensure smooth energy supply to the industries.

DAWN.COM | Business | Rs70 billion package for five export sectors

 

[Neo]

Spending on health, education falls sharply​

Saturday, June 13, 2009

ISLAMABAD: The government’s spending on public health and education as a percentage of GDP during fiscal year 2008-09 reduced considerably due to financial constraints. This makes health and education indicators unsatisfactory compared to other Asian countries.

Health expenditure during 2008-09 reduced as a percentage of GDP to 0.55 per cent and education to 2.1 per cent as against the previous year when it stood at 0.57 per cent and 2.47 per cent respectively, says Economic Survey 2008-09 released here the other day.

It says that spending on education in terms of GDP stood at 2.5 per cent in 2006-07 and 2.47 per cent in 2006-07. Interestingly, Public Sector Development Programme (PSDP) allocations for education during the year under review were reduced by 33 per cent to Rs4.16 billion against the original allocation of Rs6.27 billion.

With the meager allocation, one cannot expect the country’s health and education sectors to perform well. That was the reason the sector confronts considerable strains, as there is only one doctor for 1212 persons, one dentist for 18010 persons and availability of one hospital bed for 1575 persons, states the Economic Survey 2008-09.

This poor situation could be attributed to unequal distribution of health facilities along with persevering malnutrition, poverty and inadequate allocation for the health sector.

According to the survey, in absolute terms, public sector’s fiscal allocation for health was increased from Rs60 billion in 2007-08 to Rs74 billion in 2008-09, while as per cent of the GDP it declined. Of the total expenditures during the year under review, Rs33 billion was spent on development and Rs41.1 billion on current expenditure.

During FY08-09, there were only 133956 doctors, 9012 dentists, 65387 nurses and 10002 LHVs in Pakistan.

Pakistan is still lagging behind compared to other Asian countries such as China, Thailand, Indonesia, India, Sri Lanka and Bangladesh in terms of human welfare indicators. Among these countries, Pakistan depicts a grim picture regarding health facilities.

Mortality rate under five years per thousand in Pakistan is the highest ie 90, compared to India’s 72, Bangladesh 61, Nepal 55, Sri Lanka 21, China 22, Thailand 7, Philippines 28, Malaysia 11 and Indonesia 31.

Infant mortality rate was the highest in Pakistan at 73 per 1,000 during 2007, as against 70 in 2005, which indicates that Islamabad performed poorly once again in this aspect. In India infant mortality stood at 54, in Sri Lanka at 17, Bangladesh 47, Nepal 43, China 19, Thailand 6, Philippines 23, Malaysia 10 and Indonesia 25.

Although the ratio between available health facilities and the population has recorded a slight improvement over last year and the number of doctors has increased, it is yet insufficient to provide health coverage to the growing population.

 

[Neo]

Govt needs another $4bn​

Saturday, June 13, 2009

LAHORE: Senior Punjab Minister Raja Riaz has said the government needs another $4 billion for reviving economy as it has so far received $11 billion.

Speaking at the Lahore Chamber of Commerce and Industry on Friday, the minister said the government was taking all necessary steps to overcome energy crisis as it was well aware of the sufferings of the masses and the difficulties being faced by the industry. He said a crash energy conservation plan had already been rolled out to bridge the demand-supply gap.

LCCI President Mian Muzaffar Ali, Senior Vice President Tahir Javaid Malik, Vice President Irfan Iqbal Sheik, former President Mian Misbahur Rehman and former Vice President Aftab Ahmad Vohra also spoke on the occasion.

He said the government was quite conscious of the problems being faced by the business community in the wake of energy shortage, law and order situation and high mark-up and was taking measures to ensure relief to the industry, which was the backbone of economy.

In his speech, LCCI President Mian Muzaffar Ali urged the minister to make all business policies in consultation with stakeholders as in the past that practice was hardly seen anywhere. He said a number good policies in the past could not give desired results for want of due attention to their implementation.

On energy crisis, he urged the minister to tap alternative energy resources because it would help curtail the import bill. Owing to the shortage of electricity, he said, not only the industry was heavily suffering but it was feared that unemployment could further go up.

He said the federal government should immediately start construction of big water reservoirs including Kalabagh dam. He said infrastructure played an important role in industrial growth and “there is a need the government expedites up-gradation of infrastructure which will not only encourage local investors but will also help attract foreign investment.”

He called for widening the scope of businessmen-police liaison committee by including all industrial areas in it as an improved law and order situation was a prerequisite to investment.

 

[Neo]

‘Proposed GST on software to hit IT growth’​

Saturday, June 13, 2009

LAHORE: Chairman Federal Task Force on Information & Communication Technologies (ICT), Salim Ghauri, has said the proposed 16 per cent general sales tax (GST) on computer software will play havoc with the growth of information technology (IT) sector.

Reacting to the proposal on Friday, he said that any such move would take Pakistan’s IT industry back to square one. Reports have suggested that increased usage and sales of certified computer software worth millions across the country have encouraged tax authorities to tap the revenue potential of the business. Earlier, the government had imposed GST on computer hardware.

Ghauri noted that the IT industry was already in limbo and it could not be burdened further. The policies of the Pakistan Software Export Board (PSEB) have helped the IT industry in the recent past but the global recession has affected it. “Fate of many IT firms is hanging because of sudden drop in sales of their software globally,” he added.

He pointed out that the volume of internally used software was meagre than exports. Furthermore, the slow pace of automation of public sector departments was a hurdle in the fast growth of IT in Pakistan. He said the Federal Task Force on ICT was already assigned the task of suggesting ways and means to enhance IT exports and the task force was finalising its proposals.

 

[Neo]

Engineering goods exporters get Dutch input​

Saturday, June 13, 2009

LAHORE: Engineering sector experts discussed networking and experiences of companies trained under the CBI, a Dutch government-supported export coaching programme, here on Friday.

In a meeting of Pakistani engineering goods exporters, CBI alumni guided new entrants in the export field while its experts provided specialised input for effective export-related preparation by firms producing industrial machinery, auto parts and plastic goods.

The meeting was told that since 2005, Pakistan’s government has taken keen interest in promoting exposure of the engineering sector in Europe, by mandating the Engineering Development Board to participate in engineering-related trade fairs. That resulted in exposure of a few hundred SME companies to the European and South Korean markets and businessmen started recognising exports as a means of stabilising their order books, which had hitherto been dependent only on a handful local original equipment manufacturers (OEMs) and prone to the ups and downs of the local market. That period saw an export-led meteoric growth of companies.

In the meeting, some representatives of exporting firms criticised lack of interest on the part of Trade Development Authority, which seemed to have lost direction and whose working had never been slower than at present. The exporters also felt that the State Bank’s Long Term Financing Facility for Export Oriented Projects also needed to be reviewed as commercial banks did not show any support for that mode of financing.

 

[Neo]

Picture of a squeezed economy...​

The Economic Survey for 2008-09 released in Islamabad by the adviser to the prime minister on finance, Mr Shaukat Tarin, fleshes out the economic contraction he had repeatedly outlined in the recent past. The year was spent by the nation under a PPP coalition; hence the responsibility for what has transpired lies at the doorstep of the incumbent government. Yet, much of the trouble that still stymies the national economy is a carryover from the past that belonged to the PMLQ-Musharraf incumbency. The expectations of the PPP government have been belied: the projected GDP growth rate was set at 5.5 percent, then revised down to 3.5 percent, and finally fixed at 2.5 percent with the help of the IMF. That target too has been missed.

Much of what has happened was expected and it would be wrong to wring one’s hands and fling accusations at the PPP government to increase the pressure being built for a mid-term change of government. But the truth is that a proportion of the negative performance is owed to the fact that a new government was trying to handle the legacy of the past and couldn’t come out shining. Another mid-stream change will not be helpful. In fact we need to set a path to continuity and certainty in policy. Therefore the need is to look at the economy realistically and think hard about what new initiatives can be taken in hand for the next year. The country is still not “normalised”. The insurgency that we face has its tentacles all across the national territory and our resolve to finally stand up to it will have further consequences for the economy before things are normal again.

Some of the negative readings in the Survey belong to the economic perennials of the state: revenue collection estimate was blown up irrationally, then revised and finally not achieved. We don’t collect at the level which India manages and have failed to improve collection even after years of high growth. After the contraction we allowed through a tight monetary policy and the downturn in the sectors linked to exports, revenues are expected to sink even more. Agriculture, which was deliberately targeted for quick growth, has over-produced, creating other familiar problems associated with glut, and may not yet be ready for taxation. Mr Tarin says the feudal lobby is so strongly set against agricultural tax that he fears “martyrdom” if he tries to squeeze it for revenues.

In the coming days, TV channels will register a generally plaintive mood of the various stakeholders. Tight fiscal policy has prevented hyper-inflation but it has depressed the manufacturing sector dependent on easy credit. All over the world interest rates have been lowered to jump-start the economy but in Pakistan high inflation is more feared than low production. The country has been attacked by dollar flight, pushing the value of the rupee down and thus undermining the inflation targets set by the government. The reason for the conversion of assets into dollars prior to flight was the advance of the Taliban into more and more territories formerly controlled by the state. People with assets feared losing everything in the event of a Taliban victory. Law and order in Karachi and the rise of ethnic violence compounded the feeling of insecurity created by suicide-bombings in all parts of the country. Now that the Taliban are in retreat in the face of a “national consensus”, and the Gulf economies are past their boom, the situation will change.

The past year was perhaps tougher than any year faced by the earlier regimes that avoided adverse economic trends by not challenging the rising tide of the Taliban and Al Qaeda. The energy crunch — and the “circular debt” that perpetuated it — was the legacy that the PPP government could not push back. But it achieved something else that lay in the realm of foreign policy but was to have a direct bearing on the country’s economic survival. It has been able to convince an economically troubled United States and Friends of Pakistan to lend money for the period of its trouble with the Taliban. The IMF stand-by arrangement has allowed Pakistan to pay for essential imports — long enough hopefully steady the ship of the economy.

 

[Neo]

Economy shows negative growthin dollar terms​

* Experts point at fudging figures​

KARACHI: Pakistan’s economy has shown negative growth in dollar terms owing to the depreciation of rupee against the greenback and experts have said that the Gross Domestic Product (GDP) growth figures were fudged.

The GDP grew by 2 percent during the current fiscal year, claims the government. This growth rate was achieved by revising the previous year’s GDP growth rate from 5.8 percent to 4.1 percents. Economists say that this revision has been done very late. “Normally the figures are revised within three to four months,” says Dr Shahid Hassan, a renowned economist. “This is clear evidence of fudging: either the growth rate of 5.2 percent was fudged or the revised rate is fudged,” he added.

Regarding the performance of the economy, he says: “This performance can be summed up in one word—disastrous.” Shaukat Tareen, the advisor to the PM on finance, had admitted during May this year that the 2.37 percent GDP growth estimate for current fiscal year worked out by the Federal Bureau of Statistics and endorsed by National Accounts Committee was fudged as they had not included the largest ever negative growth witnessed by the large-scale manufacturing. The government released the Economic Survey of Pakistan on Thursday, which did not mention the contraction of economy in dollar terms. Nor did it say anything about the “methodology” according to which the growth rate of 2 percent was achieved.

The GDP growth declined to 2 percent in the current fiscal year from an average of 7 percent in the past six years. “This would have come in even lower, at 0.4 percent, had officials not revised the GDP numbers for the previous fiscal year,” says Sayem Ali, Country Economist at the Standard Chartered Bank. The economy shrank to $161 billion in FY09 from $165 billion in FY08, reflecting the 18.4 percent decline in the value of the Pakistani rupee (PKR) in the last 12 months.

However, with GDP growth at three percent and inflation at nine percent the economy is expected to grow in dollar terms for the next fiscal year as the rupee is expected to remain in the band of Rs 84 to Rs 86 a dollar, which is five percent depreciation only. The saving grace for the economy has been the positive performance of the agricultural sector which expanded by 4.7 percent on account of bumper wheat and rice crops. Higher support prices and water availability have helped to improve farm output and support more than 2.2 million workers involved in the rural economy.

Regarding the medium-term future of the economy, Ali says that persistently high inflation, tough measures taken under the IMF programme, and the rising security-related expenditure are weighing heavily on the economy. The economy is slowing to a near-halt, he says. “Pakistan’ economy is slipping into recession,” he says. “The policy fous needs to shift from stabilisation to growth in order to avoid this situation.” The government went to the IMF for a $7.6 billion loan in November 2008 as it faced a balance-of-payments crisis and quick depletion of foreign exchange reserves. The subsequent build-up of forex reserves and a stable rupee have helped to bring down inflation and allow the government to meet its external debt obligations. saad khan

 

[Neo]

Budget 2009-10: Govt may approve Rs 70bn for revival of industrial sector​

ISLAMABAD: The government is committed for turning the fortunes of the ailing industrial sector, which has undergone the longest ever decline in production during the outgoing fiscal year.

Federal government is likely to allocate Rs 70 billion for the revival of the industrial sector in the upcoming budget, official sources told Daily Times.

The government is set to announce setting up of Rs 40 billion Industrial Revival Fund for five export oriented industries in the budget 2009-10. Another Small and Medium (SMEs) Enterprises Development Fund would be created with an allocation of Rs 5 billion to assist this vital sector to achieve growth according to the potential. The government is also expected to announce creation of Venture Capital Fund worth Rs 2.5 billion to help the industrial sector.

According to the official sources, funding for these three proposed funds would be done from Public Sector Development Programme (PSDP) where the federal component is Rs 421 billion for the upcoming fiscal year 2009-10.

The export-oriented industries that would benefit from the proposed Industrial Revival Fund are textile, leather, sports goods, surgical instruments and gems and jewellery sector, official sources added.

The assistance to these industries would not be Research and Development, as the government would help reviving these sectors with advise from international experts.

Apart from the proposed incentive package for industrial sector, the government is expected to revise downwards the gas tariff for the industrial sector to reduce their cost of production and help them achieve competitiveness in international markets.

According to the official sources the gas distribution companies have been able to achieve savings to the tune of billions of rupees owing to the gas pricing mechanism which is linked to the crude oil prices in the international market. This amount would be utilised to provide relief to the export oriented industrial sector.

The share of industrial sector in Gross Domestic Product is lower than agriculture and services sector but its contributions in federal taxes is over 60 percent and the government is considering giving some tax incentives also to achieve the revival targets.

The year 2008-09 was a dismal period in a way since the industry was confronted with a host of problems. The recent global economic crisis has impacted trade badly. The impact of globalisation is apparent on both demand and supply sides of the trade equation. However, global supply capacities have exceeded more than demand in recent years.

Domestically, the increase in cost of utilities, (Power, Gas, Transport, and Petrol) has impacted the viability thus forcing the industry to make distress sales. Resultantly all competing countries are making distress sales to sustain their market share.

Textile Industry: Pakistan is the 4th largest cotton producer and 3rd largest cotton consumer. The textile and clothing industry has been the main driver of the export

based industry for the last 50 years in terms of foreign currency earnings and jobs creation. Textile industry nourished under official patronage, but lost its euphoria in the post-quota regime. Its share in exports had declined from 66 percent in 2004 to 53.7 percent in current financial year. The Textile Industry in Pakistan has not been able to reap all the benefits of post-quota regime as compared to other regional competitors.

 

[Neo]

Rs 646 billion allocated for PSDP​

ISLAMABAD (June 14, 2009): The government on Saturday announced allocation of Rs 646 billion, with federal share of Rs 421 billion and provincial Rs 200 billion, to finance uplift projects in different sectors through its Public Sector Development Programme (PSDP) 2009-10. Another Rs 25 billion has been earmarked for Earthquake Rehabilitation and Reconstruction Authority (Erra) which is not expected to receive any external financing in 2009-10.

The allocation for water and power division (water sector) has been raised from Rs 31.2 billion of current financial year 2008-09 to Rs 47.255 billion for the next fiscal year (2009-10). The allocation for power sector is higher by Rs 11.3 billion than the allocation made in the preceding year's budget.

The government has allocated Rs 39 billion for Diamer Bhasha dam and Neelum-Jhelum hydropower project in Public Sector Development Programme 2009-10. A sum of Rs 8 billion has been earmarked for acquisition of land and resettlement plan of Bhasha dam victims. The total cost of the project has been estimated at Rs 60.05 billion. The amount of Rs 15 billion has been allocated for "Construction of Diamer Bhasha dam" for which total cost has been assessed at Rs 805.087 billion. The government has allocated Rs 16 billion for Neelum-Jhelum Hydropower project in AJK and total cost of the project is Rs 84.502 billion.

An allocation of Rs 22.967 billion has been made for 800 MW Guddu Steam Power Project and Rs 18.418 billion for 500 MW combined cycle plant at Chicho Ki Malian. The amount of Rs 13.676 billion has been allocated for 425 MW combined cycle Nandipur Power Plant and Rs 12 billion allocated for raising Mangla dam including resettlement of its victims and Rs 2 billion for Gomal Zam dam.

The government has also increased funds for Pakistan Atomic Energy Commission from current year's allocation of Rs 15 billion to Rs 19.5 billion for next financial year. The allocation for Pakistan Nuclear Regulatory Authority has been enhanced from Rs 257.5 million to Rs 447.4 million.

The allocation for Petroleum and Natural Resources is Rs 1.874 billion, Rs 45.97 billion for Communication Division (including NHA), Rs 828.8 million for Ports and Shipping Division, Rs 12.68 billion for Railway Division, and Rs 35 billion for special programmes.

The government has also raised allocation for Finance Division from Rs 6.5 billion to Rs 45.59 billion for next financial year. Planning and Development Division allocation is Rs 17.9 billion that is Rs 7.8 billion higher than the current year allocation of Rs 10.156 billion.

The allocation for Local Government and Rural Development Division will be Rs 444 million, Rs 195.5 million for Tourism Division, Rs 5.582 billion for Housing and Works Division, Rs 250 million for Foreign Affairs, Rs 679.1 million for Narcotics Control Division, Rs 1.128 billion for Information Technology and Telecommunications Division, Rs 7.58 billion for Defence Division (including Suparco), Rs 129.8 million for Establishment Division and Rs 3.26 billion for Science and Technological Research Division. The allocation for Education Division has been increased from current year's Rs 4.162 billion to Rs 8.55 billion for the next financial year.

The allocation of other ministries is as follows: Rs 22.5 billion for Higher Education Commission (HEC), Rs 23.15 billion for Health Division, Rs 5.25 billion for Population Welfare Division, Rs 343.7 million for Women Development Division, Rs 484.7 million for Social Welfare and Special Education Division, Rs 135.4 million for Labour and Manpower Division, Rs 25.52 billion for KA& NA Division, Rs 12.865 billion for States & Frontier Regions Division, Rs 2.253 billion for Environment Division, Rs 450 million for Culture Division, Rs 583.2 million for Sports Division, Rs 47.8 million for Youth Affairs Division, Rs 4.918 billion for Cabinet Division, Rs 916.1 million for Information and Broadcasting Division, Rs 1.677 billion for Defence Production Division, Rs 17.962 billion for Food and Agriculture Division, Rs 2.58 billion for Livestock and Dairy Development Division, Rs 7.822 billion for Industries and Production Division, Rs 2.793 billion for Special Initiative Division, Rs 509.7 million for Textile Industry Division, Rs 180 million for Statistic Division, Rs 7.03 billion for Interior Division, Rs 839.2 million for Commerce Division, Rs 2.051 billion for Law, Justice and Human Rights Division, Rs 2.448 billion for Revenue Division, Rs 300 million for Ministry of Postal Services, Rs 50 million for National Reconstruction Bureau and Rs 15.8 million for Economic Affairs Division.

 

[Neo]

0.3 million industrial workers lost jobs in 2008 due to load shedding: report​

LAHORE (June 13 2009): Some 300,000 workers in the industrial sector lost jobs in 2007-08 due to the load shedding. According to the Second Annual Report 2009 of Institute of Public Policy, Lahore, the overall cost of load shedding to the industrial sector was about Rs l57 billion for this period.

Water shortages, similarly, cost the country as much as Rs 70 billion in 2007-08. Further, power load shedding cost the country Rs 210 billion, and over $1 billion of export earnings, the report added. Imminent increase in load shedding is likely to take the country to bloody bath, as it would leave the labour in the open without job, the economic experts expressed fear.

The industry is already in doldrums and becoming non-competitive to the last, leaving everybody including labour, industrialist and the common man in a situation in which they would not be able to last out. With a few more weeks to go before the 2009-10 Federal Budget is announced, there are a number of considerations before the policy makers.

Given the resource constraints, they have to prioritise areas for development in all sectors of the economy, tackle issues like energy shortages, and water shortages which constrains growth of various sectors of the economy and has far reaching implications for exports, employment and poverty.

Development of the power sector with better management of electricity distribution is the need of the hour and one hopes that policy makers, when they prepare the Federal Budget, would focus on this sector, as it has implications for all sectors of the economy.

Investing in enhancing power generation capacity in the country and upgrading existing power generation facilities, along with improvement in the distribution system would go a long way in bringing about an end to the energy problems faced by the various economic sectors and would pave way for improved performance in the future, the report said.

Energy shortages and upward adjustments in prices had raised the cost of production in local industry, and along with lower demand, particularly for consumer durable it contributed to the sluggish performance of the large-scale industry. It is to be seen what the Budget has in store for this sector.

To move forward, the small and medium sized enterprises in the informal sector would need focus of public policy. This sector employs large numbers and, if it is developed, it would not only contribute to increasing the rate of growth of GDP, but help reduce poverty and narrow income distribution in the country, the report added.