Pakistan Economy: News & Discussion

[thethinker]

Delayed decisions hurting economy

ECONOMIC decision-making can either lead to progress or stagnation. A delay in taking a right decision can be as bad or even worse as making a wrong choice, and will often heavily cost the people and the economy.

Little wonder then that as the head of the government agency tasked to increase the country’s exports, Trade Development Authority of Pakistan (TDAP) Chairman S.M. Muneer is deeply worried about Pakistan becoming less efficient and more expensive in the international markets because of the inordinate delay in the announcement of the promised package to bring down the industry’s cost of doing business and boost exports.

“The falling exports and closing factories are giving me sleepless nights,” Muneer told Dawn. “If a factory closes down once, it becomes very difficult to revive it.”

Pakistan’s exports have fallen by over 10pc to $3.432bn during the first two months of this financial year from $3.825bn in the same period last year, as the manufacturers reel under rising energy prices; electricity shortages; influx of cheap, subsidised goods from China and India in the domestic market; heavy taxes on manufactured exports; an unrealistically strong local currency; and the non-payment of tax and other refunds to exporters.

The fall in the country’s exports is across the board and has hit the textiles, leather, sports goods and carpets businesses hard. The declining trend has been holding for the last several months, with Pakistan’s merchandise exports dropping 3.5pc during the last fiscal year.

Manufacturers and exporters blame government policies for the present situation, saying factories are closing down and workers being retrenched. “At least 30-40 member mills of our association have completely shut down because of losses. Others have cut down production,” a spokesman for the All Pakistan Textile Mills Association said.

http://www.dawn.com/news/1212412/delayed-decisions-hurting-economy

 

[thethinker]

Rift surfaces in govt over handling of uplift projects

ISLAMABAD: Corroborating a brewing rift within the PML-N government, Planning and Development Minister Ahsan Iqbal hit back at his two cabinet colleagues on Friday, saying scrutiny of development projects was irritating some ministries.

He was responding to recent statements made by Water and Power Minister Khawaja Asif and Petroleum and Natural Resources Minister Shahid Khaqan Abbasi at a seminar that the Planning Commission was “detrimental to national interest” and should be disbanded.

Also read: Local poll: ‘N’ grapples with ‘parties within party’

They had also criticised two energy sector regulators — Nepra and Ogra — and said the Planning Commission should cease to exist as early as possible if the country were to move forward.

Ahsan Iqbal did not name anybody or entity, but explained in a written statement that prudent cost cuts by the Planning Commission in the process of financial evaluation perturbed some ‘brother ministers’. “The Planning Commission has rationalised the amount of PSDP projects to the total cost of Rs490 billion during the last financial year, which is almost equivalent to the total allocation of PSDP amount for a year,” he said.

“Some ministries and divisions feel irritated on close scrutiny of development projects, but this cannot distract the Planning Commission from its responsibility to safeguard the public money and ensure its effective utilisation in development projects,” said Mr Iqbal. “Business as usual is unacceptable in the execution of public sector development programmes due to presence of a professional team in the Planning Commission.”

He said negligence, poor project management and estimates, as well as lack of capacity of some ministries and divisions, caused delays in execution of development projects and cost overruns.

Another senior cabinet member told Dawn that the two energy ministers were in fact pointing towards ‘political problems within the ruling party’ by speaking on professional and technical issues.

“The actual target is the prime minister and the Punjab chief minister, who are taking interest in energy projects associated with the China-Pakistan Economic Corridor (CPEC),” he said.

http://www.dawn.com/news/1212102/rift-surfaces-in-govt-over-handling-of-uplift-projects

 

[thethinker]

Decline in Punjab’s cotton crop

DID a newly diagnosed disease stunt the growth of cotton plants in Punjab, or did the farmers leave the plant unattended and vulnerable, causing damage to the crop?

This issue is becoming increasingly relevant as the arrival of cotton has reportedly dropped by 25pc and some ginning factories have suspended their operations in the middle of the run up to the peak season.

The farmers suspect the emergence of a new disease. Meanwhile, official crop managers cite other factors, like the lack of farmers’ interest in the crop (because of the price factor); a big drop in the application of fertiliser; persistent rains and the resulting mismanagement; and inconsistent government policies affecting the crop.

In either case, Punjab’s cotton output is said to be down by 1.5m bales so far, while Sindh’s has dropped by 1m bales. This has stoked panic buying and caused prices to rise around 40pc in the last few weeks.

The farmers, especially those in Punjab’s core cotton belt (from Multan to Rahim Yar Khan), claim that a new disease — which they, together with pathologists, have yet to diagnose —stopped the crop’s growth by the last week of August.

Earlier, the crop had survived and was said to be in good health. But then it suddenly stopped growing and farmers in certain pockets were said to have given up on it and used it as fodder for their animals because it was leafy and green and without any bolls.

The farmers, especially those in Punjab’s core cotton belt (from Multan to Rahim Yar Khan), claim that a new disease — which they, together with pathologists, have yet to diagnose — stopped the crop’s growth by the last week of August
Some pesticide importers agree with the farmers and claim that even different combinations of pesticides could not retrieve the situation. They are also fighting this new disease and have only been able to control it by 50pc in the best of circumstances.

On their part, agriculture department officials say no new disease can be ruled out given the changing climate, which has become part of the agricultural lifecycle.

But they followed up on the farmers’ complaints and checked certain pockets of the crop with stunted growth that were reportedly under attack, but found no unusual activity.

What they found was the cementing effect on the soil owing to persistent rains. This stopped the aeration of the root zone and affected the health of the plant. Since the plants were very weak, they could not stand the additional pressure created by the stoppage of air in the root zone.

The officials also cite the lower usage of fertiliser. Against the targeted 792,000 tonnes of urea, only 561,000 tonnes were utilised in July-August.

During the same period, against a target of 231,000 tonnes, only 71,000 tonnes of di-ammonium phosphate fertiliser were applied. And DAP usage was said to have dropped 83pc last month.

The officials also disagree with the reported speed with which the new disease spread. No new disease — regardless of its deadliness — could affect an entire ecological zone within a span of one month, they say.

The crop is still leafy and may have traces of the disease on it. It can, and should, be investigated thoroughly.

Published in Dawn, Business & Finance weekly, October 12th, 2015

http://www.dawn.com/news/1212418/decline-in-punjabs-cotton-crop

 

[Neo]

The importance of Karachi
By Waleed Tariq
Published: October 12, 2015

The claim that Karachi generates 65-70% of the revenue needs to be corrected. PHOTO: REUTERS

KARACHI: Some debates continue forever with statistical evidence and philosophical arguments driving the dispute forward in perpetuity.

One of those is Karachi’s input to the country’s overall tax revenue. Even on its face, the need to isolate Karachi merits discussion. But that’s what people do when they come out with all guns blazing in hailing the metropolis as the saviour.

One might even concede to their overzealous nature. Karachi, the business hub and former capital, attracts millions to its workforce and generates a lot of economic activity. But is it true that it drives the entire country? Many claim that.

“It is quite irresponsible for you to state this … journalists don’t want to read, they say whatever they want. They need to be held accountable,” was a political economist’s comment to an article that claimed “Karachi generates 65% of Pakistan’s revenue, and if the metropo lis’ security situation improves, there can be better economic prospects for everyone”.

The statement, not driven by an academic study, was a mere repetition of the popular opinion.

PTI, MQM and PPP have all mentioned the populist view.

None of them have, however, mentioned the source of this figure nor has anyone felt the need to question this ‘sacred percentage’.

But exploring facts comes close to answering the question.

Revenue collected from the country includes three Large Tax Units (LTUs) in Karachi, Lahore and Islamabad, 18 Regional Tax Offices (RTOs), including Karachi RTO–I, II, III, Lahore, Peshawar, Rawalpindi and Quetta, among others. States earn their revenue mainly through direct, indirect taxes and income from public corporations.

Read: The irony: Cost to collect tax higher than tax collection

In Pakistan, provincial budgets and provision of public goods in the provinces are dependent on transfers by the federal government.

The provinces are also obliged to collect taxes, ie capital value tax on immoveable properties, property taxes, stamp duties, motor vehicle levies, land revenue and agriculture income tax, but their collection is minimal. Reports suggest provinces, overall, contribute about 7% of tax and 9% of non-tax revenues of the country.

While there is no scepticism on Karachi’s improving security situation favouring the economy, economists argue that rather than generation, the city ‘dominates’ the country’s revenue-collection statistics.

The distinguishing factor

Much of the country’s economic, manufacturing, services and other value addition takes place in Karachi.

But what is the difference between revenue generation and collection? According to an article by State Bank of Pakistan’s deputy governor Mohammad Ashraf Janjua, we should know two terms: impact and incidence. Those who pay tax, but pass on the final burden to others are bearing the impact of a tax, those who bear the final burden are bearing the ‘incidence’. Thus, if machinery is unloaded in Karachi (tax is paid here), but is being used in Punjab, the tax is collected from Sindh, but generated by Punjab.

“It has the advantage of being a port city, as well as housing head offices of major financial institutions,” economist Kaiser Bengali, who is also adviser to Balochistan chief minister, told The Express Tribune. “Most companies have their head offices in Karachi where they pay their income tax but earn their income from the entire country.”

Asim Bashir Khan, in Akbar Zaidi’s Issues in Pakistan’s Economy, says Karachi ranks on top on the basis of average overall tax collection between 2000 and 2012 — it has an average of 62.4% followed by Lahore 13.63%, Rawalpindi 8.33%, Multan at 5.50% and Peshawar at 3.3%.

The average of direct tax collection is almost the same, with Sindh being the highest with 64.97%, Punjab with 30.93%, Khyber Pakhtunkhwa with 3.24% and Balochistan with 0.86%. Karachi dominates with an average 61.49%, followed by Lahore, Rawalpindi, Multan and Peshawar with 17.33%, 4.30%, 3.65% and 3.03%, respectively.

DESIGN: NABEEL AHMED

Indirect tax collection statistics are also similar as direct taxes with Karachi dominating with an average 62.79%, followed by Lahore, Rawalpindi, Multan and Peshawar.

“On average, the two most developed provinces of Pakistan – Sindh and Punjab – make significant contributions; but this is strictly due to its monopoly over port resources, which facilitate superiority in collection of indirect taxes such as custom sales tax and FED on imports,” writes Khan. “Sindh’s share in collection of custom duty was 84.21%, followed by Punjab with 12.43%, K-P with 2.3%, and Balochistan with 1.05%.”

Read: Oversight committee formed to implement tax reforms

But does Karachi have an edge just because of revenue from customs or profits declared by financial institutions or the metropolis contribute to the national treasury in other ways too?

The indirect input

“Millions of migrants from other provinces flock to Karachi to earn their living. Billions are remitted to their families based outside Karachi. These remittances make the difference between a family’s survival and a life of despondency due to no earning opportunities available to the migrants in their localities or cities,” says former Karachi Chamber of Commerce and Industry president Majyd Aziz. “All this is tax-free for migrants, but these remittances spur up economic activity in areas outside Karachi.”

Aziz argues Karachi’s potential is way beyond the current oft-repeated figures.

“Goods destined for the northern areas traverse through Karachi’s roads and use other facilities and utilities. What if a substantial toll tax is levied on every truck moving out of Karachi? This would bring in billions to Karachi’s coffers, which could be spent on improving the physical infrastructure,” he says.

According to FBR data (as of December 9, 2014), 881,262 tax returns were filed across the country. Karachi leads this list as well — and by a wide margin.

Zaidi, in his book, says that in terms of direct taxes, Karachi contributes more than 35% of all of Pakistan’s taxes. Similarly, he adds, if one looks at the sales tax collected, which is consumption tax, it gives an indication of the nature of economic activity, and of the consumer market in Karachi as compared to the rest of Pakistan.

We can safely conclude the amount taxed through Karachi includes both collection and generation. Those referring to Karachi’s contribution, either in naivety or deliberately, refer to collection and they are right.

Karachi, the industrial hub, does contribute the most to tax collection. But the word should not be generate because, while it generates much, it collects far more than that.

The writer is a staff correspondent

Published in The Express Tribune, October 12th, 2015.

 

[Neo]

Rs 55bn Bhikki Power will be completed in 2017: PM

• October 09, 2015

SHEIKHUPURA – Prime Minister Nawaz Sharif on Friday said that Pakistan was heading towards an economic revival as its economy turns around and promises a bright future for the people of Pakistan.

He was addressing the ground-breaking ceremony of the Rs 55 billion Bhikki Power project near Shiekhupura. The project, to be completed in 2017, would add a substantial 1180 megawatts electricity to the national grid. The prime minister said the project that could have cost Rs 95 billion as per the NEPRA tarrif, would now complete in only Rs 55 billion, owing to the transparent policies of the government.

Nawaz said the PC-I of the project called for higher cost of commissioning of the project. It could have been an easier choice for any crook government to exploit it for sheer popularity, he said. But the PML-N government does not believe in such tactics and treats the national funds as a sacred trust of the people. He said the project would save Rs 360 billion in its project-life of 30 years and the work on Bhikki and two power projects would help Pakistan save a whooping Rs 1080 billion.

The prime minister said neither the country could progress, nor electricity be produced just by chanting slogans and burning electricity bills while sitting on containers. He said those who hurled baseless allegations atop the containers, lack the ability to understand what it means to serve the nation selflessly. Nawaz said that those criticising the government just for the sake of criticism were doing no service to masses.

He said that he always prayed to Allah Almighty to guide such people, to sanity. He said inflation was at its lowest ebb in country's history, while the economic indicators were positive and the world today was acknowledging the great economic turnaround. He said the government believes in serving the masses and was committed to providing cheap electricity for consumers, to run industrial units, make the exports viable, increase employment, enhance agricultural yield and turn around the national economy.

He termed it criminal offence of the previous governments who neglected the critical need of electricity generation. He said now the onus of rectifying the ills of the past was on his government which was doing its best to end the load shedding by 2018. He paid tributes to Shahid Khaqan Abbasi and others who worked day and night to make the project feasible and provide electricity at lower and cheaper rates.

The prime minister said his government was striving to end power shortage and working on mega projects for improvement of road networks across the country in a transparent manner. In this regard, he also cited the Rs 150 billion re-surfacing of the motorway project. Nawaz mentioned the Neelum Jhelum, Dasu dam, Tarbella IV, Thar Coal and several other projects that were working at a fast pace.

He regretted politicising of the ambitious farmers package and said the government was going in appeal and would like it revived as it would greatly help the farming community who was going through a difficult time. He said the government wanted to install solar tube-wells and provide series of incentives for the farmers, but unfortunately some political parties wanted to bring a bad name to the package.

Prime Minister Nawaz earlier performed ground-breaking ceremony of the project at Bhikki to be jointly commissioned by M/s Harben Electric International of China and the General Electric Company of the United States. The event was attended by Punjab Governor Rafiq Rijwana, Chief Minister Shahbaz Sharif and Minister for Petroleum Shahid Khaqan Abbasi.

http://www.newsnow.co.uk/h/World+News/Asia/Pakistan/Economy

 

[thethinker]

Trillions of Rupees Corruption in Hydro Power Projects in Pakistan.

http://www.awaztoday.tv/News-Talk-S...tion-in-Hydro-Power-Projects-in-Pakistan.aspx

 

[thethinker]

http://bigstory.ap.org/article/7063...rruption-lets-militants-get-national-id-cards

Pakistan corruption lets militants get national ID cards

ISLAMABAD (AP) — Foreign Islamic militants have been able to secure Pakistani national identity cards for years in exchange for bribes as low as $100, giving them vastly greater freedom to operate, according to a report by Pakistan's top intelligence agency obtained by The Associated Press.


The issue of foreign jihadis operating so easily in Pakistan has regional and even global implications. The country has long been a destination for aspiring global jihadis to receive training, some of whom are sent back abroad to conduct attacks. Foreign governments, particularly neighboring Afghanistan, have frequently accused elements of the Pakistani government of sheltering Islamic militant groups that frequent the porous and lawless tribal regions along the Afghan border.


According to the recent report by the Inter-Services Intelligence or ISI, thousands of foreigners have illegally obtained Pakistani national IDs. Most of them are Afghan refugees trying to have a more regular status, but they also include at least dozens of Islamic militants from China, the Maldives, Uzbekistan and the United States. Pakistani militants also often secured a second national ID card under a fake name, making it harder for local law enforcement to track and apprehend them, the report says.


"If the registration authority of any country is not corruption free, there are serious security concerns," said Pakistani Interior Minister Chaudhry Nisar Ali Khan at a press conference in Islamabad on Aug. 23. Khan said he had set up a permanent committee of officers to work on ending the practice, adding, "We have prioritized it."


Among the most notorious beneficiaries of this system was Adnan Shukrijumah, a Saudi-born U.S. citizen and a top al-Qaida commander. Shukrijumah was killed in a Pakistani army raid in a tribal region along the Afghan border in December 2014. He was found in possession of a Pakistani national identity card under the name of Shahzaib Khan, according to the ISI report.


The vast majority of those obtaining fake national IDs were Afghan refugees seeking to extend and legitimize their presence in Pakistan. But the loophole was also regularly exploited by foreign Islamic militants. The ISI report lists more than 40 foreign militants and their family members who had lived illegally in Pakistan— some of them wanted for terrorism-related charges in Pakistan or in their home countries.


Shukrijumah was on the FBI's most wanted list with a $5 million reward for his capture offered by the U.S. government. Another example was Mohammed Amin, a native of the Maldives who was wanted by his government. Amin lived in Pakistan for four years with a fake ID; according to the ISI report, he fled the country in 2011 using a Pakistani passport.


The IDs were most useful for men like Shukrijumah, who could visually pass as Pakistanis. But even for foreign militants who looked distinctly foreign, the IDs could be used for renting apartments and vehicles, buying cell phones and SIM cards or wiring money.


The main fault in the ID scandal seems to lie with corruption in Pakistan's National Data Registration Authority, or NADRA, the organization that issues national ID cards. An initial NADRA probe has termed the issuance of the ID cards to foreigners "a threat to national security" and recommended a fact-finding commission.


In a second NADRA internal report, seen by the AP, a low-level Pakistani clerk was found to have made millions of rupees, equivalent to tens of thousands of dollars, stashed in multiple bank accounts, by issuing fake ID cards to local al-Qaida-linked Sunni militants.


A NADRA spokesman, Samad Khurram, said that his department had already sacked 43 officials, including one director general, three directors and several other high profile employees — some of whom were arrested and charged with crimes including fraud and forgery.


Government prosecutor Manzoor Ahmad said that a court last week in the southwestern city of Quetta sentenced two NADRA officers to 20 years in prison each. Two lower-level employees received jail sentences of seven and four years.


On Tuesday, three NADRA offices in the southern city of Karachi were shut down and sealed, said Ashfaq Aalam Khan, a Federal Investigation Agency official, who is part of the taskforce probing the issue. He said his agency had already opened several inquiries after arresting six senior NADRA officials, and nearly 500 more cases being pursued against the employees and their partners and front men outside the government.


Khurram, the NADRA spokesman, said another 120 employees were still facing an internal inquiry. More than 29,000 fraudulent ID applications from foreign nationals were found in the system, Khurram said, adding that the majority were from Afghan refugees. Khan, the interior minister, said that some 80,000 fake ID cards had been blocked in the last four years.


Khurram wouldn't say whether the removal from jobs and the inquiries were related to the ISI report. "We do not comment on an on-going inquiry," he said.

A former chief of the anti-cybercrimes division at the Federal Investigation Agency, Ammar Jaffri, said the flood of fake IDs has already hindered authorities' ability to track the communications and financial networks of terrorist groups.

"If you start tracking a terror plot or its financing in Europe or America, you may simply end up at a fake ID card issued in Pakistan," he said.

 

[thethinker]

Mass tax avoidance chokes Pakistan economy
http://www.ft.com/intl/cms/s/0/f8e27d2a-034c-11e5-8333-00144feabdc0.html#axzz3oNRwgtcy

As an industrialist in Pakistan’s southern port city of Karachi recounts his woes, from frequent power cuts to a shortage of trained workers, his accountant barges in with a question.

“Sir, how much should we earn from the farm this year?”

Let me see how much we need to earn from the farm and get back to you,” the industrialist replies.

The encounter provides a glimpse of one of Pakistan’s toughest economic challenges: reforming its chronically dysfunctional tax-collection system.

Only about 0.5 per cent of Pakistan’s 200m people pay income tax, compared with 2-3 per cent in India and 20 per cent in China, according to the OECD.

Compliance with income tax payments is so poor in parts of the country that the cost of running local tax offices exceeds the tax they collect.


“Frankly, the government could end up saving money in some of our remote areas if the tax offices there were shut down today,” says one government official.

 

[FRYCRY]

Jiye Muhajir, Jiye Altaf bhai

 

[thethinker]

@tarunraju @pmaitra @sob Merge this economy news about Karachi with Pak economy thread ....

 

[thethinker]

Charity beyond borders: Indian NGO raises funds for Pakistani girl's treatment

http://www.dawn.com/news/1212816/ch...go-raises-funds-for-pakistani-girls-treatment

MUMBAI: As tensions between India and Pakistan run high and leaders from either side lock horns over a range of political differences, a rare act of kindness from across the border might have changed a Pakistani girl's life forever.
An Indian non-governmental organisation (NGO) has raised almost Indian Rs1.3 million in funds for the treatment of a young Pakistani girl, who suffers from Wilson's disease — a rare genetic disorder, said a [URL='http://timesofindia.indiatimes.com/city/mumbai/Pak-girl-returns-after-web-funded-med-care/articleshow/49328782.cms']report published on The Time of India.

Saba Tariq Ahmed, a 15-year-old Karachi resident, returned home along with her mother Nazia, after undergoing treatment for the disorder — that results in poisonous accumulation of copper in the body — at Jaslok Hospital in Mumbai.

TOI quoted Jaslok hospital CEO Dr Taran Gainchandani as saying: "Saba and her mother, Nazia, boarded an afternoon flight for Karachi. They were extremely happy about how well the treatment worked for Saba."

According to the report, Saba's family was assisted financially for her treatment twice between April and October, 2015.

In April-May, an NGO, Bluebells Community, raised INR 700,000 from Mumbai citizens. "But Saba did not respond too well to the regularly prescribed medicines for Wilson's disease," TOI quoted liver specialist Dr Aabha Nagral, who has been treating the teen, as saying.

Dr Nagral added that Saba needed a change of medication, as well as physiotherapy to regain her movement.

Saba returned to Karachi in May, but her condition deteriorated upon which, Saba's mother contacted Shabia Walia of Bluebells Community.

The NGO then started an online crowdfunding movement in order to raise INR 1 million for a three-month treatment with an alternative medication that is not easily available in India or Pakistan.

"We spread Saba's story so far and wide that we got an American NGO, Rachel and Drew Katz Foundation, contributing INR 400,000 and a London-based NGO promising free supply of medicines,'' the reported quoted Walia as saying.

A wheelchair-bound Saba then returned to Mumbai on August 24. At that point, she could not speak and had tremors and abnormal involuntary movements, said the report.

She was then provided physiotherapy and the alternative drug, Trientine — which helps remove copper accumulation from the body, said Dr Nagral. Saba is currently on two capsules a day, "but it should be stepped up to five soon,'' the doctor said.

According to the report, 100 capsules of the drug cost INR 84,000.

The doctor also took Saba out for dinner at a themed restaurant inspired by Bollywood actor Salman Khan, of whom Saba is a big fan.

According to Dr Nagral, Nazia was glad her fears about "things being not smooth in India" did not come true.

"She [Nazia] said Mumbai had been full of warmth and happiness for her and her daughter,'' said Dr Nagral.
[/URL]
http://www.dawn.com/news/1212816/charity-beyond-borders-indian-ngo-raises-funds-for-pakistani-girls-treatment

 

[thethinker]

The whole of Pakistan is founded and operated based on a bunch of lies. Be it religious, military, ideological and economy wise.

Accused of fudging data to trick IMF

http://tribune.com.pk/story/971189/silence-remains-accused-of-fudging-data-to-trick-imf/

KARACHI: Imagine how the US Federal Reserve would react if a mainstream newspaper accused it of fudging data to hoodwink an international monetary agency.

It could either go into overdrive to dispel the accusation or accept responsibility for its regulatory misconduct. But it would never play ostrich while hoping for the accusation to go unnoticed by the general public.

However, the State Bank of Pakistan (SBP) has chosen to remain silent following a similar accusation by Business Recorder, a national financial daily. It published a story on October 1 that accused the SBP of ‘fudging data’ to deceive the International Monetary Fund (IMF).

What did the trick was an alleged change in the cash reserve requirement (CRR) for five large banks on their deposits to help the government achieve the IMF’s quarterly targets.

Speaking to The Express Tribune, the SBP spokesman said the central bank would not comment on the accusation. “We have nothing to say on the issue,” he said, adding he could neither confirm nor deny any temporary change in CRR.

It is surprising that the central bank appears to be in no haste to defend its credibility, although the seriousness of the accusation can damage its reputation irreversibly.

So why – and how – exactly did the alleged statistical jugglery play out?

Under the loan agreement with the IMF, Pakistan was required to maintain its central bank’s net domestic assets (NDA) within the ceiling of Rs2.2 trillion by the end of September.

NDA mainly consists of net SBP credit to the general government plus outstanding credit to domestic banks by the SBP (minus liabilities not included in reserve money). Leaving semantics aside, let’s just say the IMF wants to limit NDA because its disproportionate growth is bad for economic management.

As opposed to the IMF’s target of Rs2.2 trillion for the end of September, the SBP website shows the NDA stock hovered around Rs2.8 trillion on September 18. This means the SBP’s NDA stock was in excess of roughly Rs648 billion.

So the quickest, and perhaps dishonest, way to reduce the stock of NDA temporarily was to tinker with the level of banks’ cash reserves for a brief period of time, thus immediately freeing up liquidity in the interbank market.

The weekly average CRR for every bank is 5% of the sum of its demand deposits and time deposits of up to one year. Every bank is bound to maintain the prescribed level of CRR, as they are penalised instantly for failing to maintain this weekly average.

Business Recorder alleged that the SBP waived CRR for big five banks, and slashed it to 3% for the rest of commercial banks, towards the end of September. This created excess liquidity in the interbank market immediately and led commercial banks to buy T-bills from the SBP.

As a result, the SBP’s stock of T-bills (which is government debt) went down, notably reducing the stock of NDA to the satisfaction of the IMF.

Former central bankers say any change in CRR must be preceded by an SBP circular – something conspicuously missing in the latest round of alleged window-dressing at the highest level of economic management.

Whether the SBP indeed waived CRR for banks is unclear. But the fact that the SBP is unwilling to come forward and dispel the impression of wrongdoing reflects poorly on its credibility.

The writer is A staff correspondent

Published in The Express Tribune, October 12th, 2015.

 

[Neo]

Pakistan’s journey from $6b to over $15b

KARACHI: After almost half its term at the helm, Pakistan Muslim League-Nawaz (PML-N) still continues to fend off allegations of election rigging and dismissive remarks over the country’s economic performance. While the government blows the trumpet of increasing foreign exchange reserves, critics tend to be indifferent over the progress as well, terming most of it as plagued with debt and borrowing.

Inflows and outflows of funds on a daily basis make it impossible to ascertain the exact share of borrowed money in foreign exchange reserves.

But a quick look at the timeline and accompanying notes reinforces the popular view that the increase in SBP-held foreign exchange reserves is mostly on the back of money that the government has either raised from global investors or borrowed from international financial institutions.

In addition to total disbursements amounting to $4.5 billion from the IMF since 2013, Pakistan has also raised at least $3.5 billion from the international bond market by floating Sukuks and Eurobonds.

In its many reports on the economy, the SBP has made it abundantly clear that it is not particularly fond of the government’s approach to shore up foreign exchange reserves on borrowed funds.

It should be noted that repayments to the Paris Club — following the debt rescheduling of December 2001 – are set to begin in 2016-17 whereas IMF repayments will start from 2017-18. It is against this backdrop that the SBP believes shifting financing away to non-debt creating inflows (i.e. foreign investments) is a must to strengthen the country’s debt servicing capacity in the future.

“A sustainable solution requires narrowing the FX gap with real earnings from exports and/or remittances, rationalisation of imports, and curbing smuggling,” the central bank advised the government in one of its recent reports.

June 2013

Nawaz Sharif-led PML-N promised an economic turnaround. But the external sector was in the doldrums already, with the country having exhausted about one-quarter of its liquid foreign exchange reserves in the past 12 months. That was mainly to pay the external deficit of $2 billion along with International Monetary Fund (IMF) repayments amounting to $2.5 billion.

The result was a massive drop in foreign exchange reserves held by the SBP: from $10.8 billion at the start of 2012-13, they stood at just above $6 billion by the end of the fiscal year.

The dire situation on the external-sector front left PML-N’s economic wizard Ishaq Dar with no choice but to seek help from the IMF – the lender of last resort.

Wooing the IMF made sense: once a country is under the IMF wings, it becomes easier for it to borrow funds from other international financial institutions (IFIs) to shore up its reserves.

September 2013

Pakistan entered a three-year IMF loan programme of $6.64 billion in the first quarter of 2013-14. With the Washington-based lender pledging to bail the country out, chances of a balance of payment crisis were now minimal and a default on international payments was definitely out of the question.

But that didn’t mean the situation on the external sector was firmly under control. The IMF programme was “not frontloaded,” meaning Pakistan was going to receive funds from the IMF in equal quarterly tranches provided the country stuck to the reforms agenda set by the IMF.

There were no Coalition Support Fund (CSF) disbursements during the quarter while external debt servicing amounted to a massive $1.8 billion. According to the SBP, there was a net drawdown of $1.3 billion in July-September from SBP reserves, which was three times larger than the decline seen in the same quarter of the preceding fiscal year.

December 2013

Foreign exchange reserves were not that high to begin with and the situation became worse during November because Pakistan had to repay $725 million to the IMF. The SBP-held foreign exchange reserves touched their lowest point ($3 billion) since 2000-01 in the second quarter of 2013-14.

However, slight improvement took place towards the end of the quarter, as the country received the second tranche of $554 million from the IMF. Times ahead seemed promising now that the “lumpy repayments” to the IMF on account of a previous loan under the stand-by agreement were over. Going forward, repayments to the IMF would now be largely offset by disbursements from the IMF.

March 2014

The SBP could now state confidently that the pressure on the country’s foreign exchange reserves had finally “started to ease” post-December 2013, thanks in part to a “lumpy inflow” of $1.5 billion from an Arab country in March.

Pakistan’s foreign exchange reserves increased $1.8 billion in the third quarter of 2013-14 as opposed to a decline of $1.6 billion in the same three-month period of the preceding fiscal year.

June 2014

The three-month period ending on June 30, 2014 witnessed the largest expansion in the SBP-held foreign exchange reserves on a quarter-on-quarter basis in recent years.

Entering the global bond market after seven years, Pakistan sold sovereign bonds to generate $2 billion from international investors in April. Furthermore, the government sold the long-due 3G/4G spectrum licences, giving another boost of $517 million to reserve in the same month.

Pakistan received another $1 billion from the World Bank and $375 million as part of the CSF in May, bringing the total SBP-held reserves to $9.2 billion, up 73% from March 2014.

September 2014

The surge in SBP-held foreign exchange reserves for two consecutive quarters took a breather in the first three-month period of 2014-15.

Although the country received $735 million under the CSF in July-September, the retirement of $1.5 billion of external debt — coupled with delays in the fourth review of the IMF programme and political uncertainty owing to the sit-in by an opposition political party – resulted in a net decline of 4% in the SBP-held foreign exchange reserves.

Read: Foreign exchange: SBP’s reserves dip below $13.5b

December 2014

The government issued an Islamic bond (Sukuk) in the international market worth $1 billion during the quarter. While a sharp drop in global oil prices was reducing the country’s oil import bill, the resumption of disbursements from the IMF after its fifth review of the loan programme further strengthened the external sector.

March 2015

Although Pakistan received an inflow of $717 million in February under the CSF, a number of budgeted inflows did not materialise in January-March. These include $3 billion from ADB, IDA and China. Therefore, repayments exceeded the total disbursements in the three-month period ending on March.

June 2015

SBP-held foreign exchange reserves surged 17% over the quarter ending on June 30 due in part to the divestment of SBP’s stake in Habib Bank in April.

Reserves went up by almost 4% in the same month following the receipt of $538 million from multilateral, bilateral and other sources, including $498 million received from the IMF.

September 2015

Foreign exchange reserves held by the SBP increased $772 million in July because of the receipt of $756 million from the World Bank.

Despite official inflows of $418 million, including receipts of $337 million under the CSF, SBP-held reserves remained almost flat on a quarter-on-quarter basis.

October 2015

The second quarter of 2015-16 began with a massive inflow into the SBP-held foreign exchange reserves, which rose by $1.8 billion on October 2. The SBP received $505 million from the IMF, $500 million as proceeds of the Pakistan International Bonds, $376 million under the Coalition Support Fund (CSF) and $263 million as syndicate financing for the government of Pakistan.

Published in The Express Tribune, October 14th, 2015.

 

[Neo]

Danish Companies Eye Renewable Energy Investment In Pakistan

Companies from Denmark are the latest to express interest in developing renewable energy assets in Pakistan, which is struggling to meet the rising electricity demand and is looking at all possible solutions. Such a scenario provides significant advantage to early movers.

Helle Nielson, the Embassy of Denmark Charge d’affaires in Pakistan, stated in a meeting with the Pakistani Minister of Water and Power, Khawaja Muhammad Asif, that Danish companies are looking for opportunities to invest in renewable energy infrastructure in Pakistan. Danish companies are interested in developing solar, wind, and biomass-based power plants, in addition to waste treatment plants. The minister also shared the vast reserves of untapped renewable energy resources available in the country.

Large swaths of wasteland and desert in the eastern and south-eastern part of the country hold immense potential for development of large-scale solar power projects. The province of Balochistan also holds significant renewable energy resources, while wind energy resources along the province’s coastline remains untapped.

Several foreign companies have expressed interest in investing in Pakistan’s renewable energy sector. Chinese companies, however, maintain a huge lead in the regard, and are those developing Pakistan’s largest solar power plant – the 1 GW Quaid-e-Azam Solar Park. Other Chinese companies, including Ming Yang Wind Power, China Three Gorges Corporation, Goldwind, and HydroChina Investment Corporation, are working to set up wind energy projects across the country.

German wind turbine manufacturer Nordex has been supplying turbines in Pakistan since 2010, while Norwegian company Scatec Solar and South Korea’s CK Solar Korea have also announced plans to set up large-scale solar power projects in the country.

http://cleantechnica.com/2015/10/12/...ment-pakistan/

 

[thethinker]

Water shortage worsens for Rabi crops
http://www.dawn.com/news/1212909/water-shortage-worsens-for-rabi-crops

ISLAMABAD: As the provinces start sowing Rabi crops, the Indus River System Authority (Irsa) is anticipating increase in water shortage to around 20 per cent, much higher than estimated a fortnight ago.

Informed sources told Dawn on Tuesday that Irsa is considering requesting the provinces to prepare contingency plans in view of higher water shortage to cater for crop watering requirements.

On Sept 30, an advisory committee meeting of the water regulator had worked out water shortage at 14pc for the Rabi season based on river flows, storage in dams and rainfall probabilities.

Also read: 5MAF water shortage feared for Rabi crops

The sources, however, said the regulator had to change its water estimates within a fortnight because river flows in the Indus and Kabul were not improving as anticipated and hence an adjustment in water probabilities would need to be made at the earliest to avoid loss to the crops at a later stage. The sources said the flows in the Jhelum region were moving almost in the same region as predicted earlier.

Irsa’s advisory committee had approved water distribution plan for all the four provinces on the basis of 14pc water shortage as it put total water availability in the irrigation system at 31.70 MAF in Rabi. The water distribution plan would, therefore, need to be changed in consultation with the provinces to make up for the lower water availability, an official said.

Based on 14pc anticipated shortage, Punjab was currently drawing 85,000 cusec water for its irrigation requirements while Sindh was getting 55,000 cusec at present. Khyber Pakhtunkhwa and Balochistan were drawing 2,600 cusec and 3,900 cusec respectively.

The water level at Tarbela dam was recorded at 1492 feet on Wednesday against its maximum level of 1550 feet, having total water resource of 3.432 million acre feet (MAF).

On the other hand, water level at Mangla dam stood at 1,218 feet against its maximum conservation level of 1,242 feet. Total water storage at Mangla was estimated at 5.637 MAF. The storage at Mangla has to be gradually brought down for technical reasons to allow Wapda authorities to complete major repair works caused by recent cracks in its structures.

Under the previous estimates, Punjab was allocated a total share of 17.08 MAF in Rabi while the share of Sindh was put at 12.90 MAF. KP was allocated 700,000 acre feet and Balochistan 1.02 MAF.

Earlier, the technical committee of Irsa had projected 30pc water shortage probabilities in river Indus at Tarbela, 35pc in Kabul at Nowshera, 30pc in river Jhelum at Mangla and 25pc in river Chenab at Marala.

Published in Dawn, October 14th, 2015

 

[thethinker]

Merchandise exports dip 14pc

http://www.dawn.com/news/1212908/merchandise-exports-dip-14pc

ISLAMABAD: Merchandise exports fell by 14 per cent to $5.164 billion during the first quarter (July-Sept) of 2015-16 from $6bn in the same period last year, indicating stock piling of industrial and agricultural products in the country.

On a month-on-month basis, exports declined by over 20pc in Sept 2015, Pakistan Bureau of Statistics data revealed on Tuesday.

Analysts say the drop is alarming for the government, as the subsidy scheme announced in the latest budget for exporters, and zero-duty access to European markets have failed to accelerate the exports.

Exports last year (July-Sept 2014-15) also fell by over 10pc as compared to the same period preceding year.

Commerce Minister Khurram Dastagir was not available for comments. However, a senior official of the ministry attributed the decline to energy shortages, especially in Punjab. But the most important issue, according to an exporter, was indifference of the government towards the problems faced by businesses.

The official informed that the commerce ministry has given a detailed presentation to the prime minister over the decline in exports and the PM is soon expected to announce a package for exporters.

Another official blamed Finance Minister Ishaq Dar for hijacking the working of the commerce ministry and heading all those committees constituted to boost exports.

He said foreign buyers were reluctant because of political uncertainty in the country.

Meanwhile, imports fell by 14.39pc to $10.679bn during the quarter from $12.474bn in the same period last year.

On a month-on-month basis, imports declined by 11.94pc in Sept 2015. The drop was one of the biggest in the last couple of years, however, which commodities witnessed a robust decline, during the month, was not clear.

The trade deficit in July-Sept 2015-16 contracted by 14.81pc to $5.515bn from $6.474bn in the same period last year. In Sept 2015, trade deficit was 26pc month-on-month lower, due to the drop in imports and exports.

Published in Dawn, October 14th, 2015

 

[Neo]

Pakistan has 18th largest ‘middle class’ in the world: report
By Kazim Alam / Creative: MOHSIN ALAM
Published: October 16, 2015

KARACHI: Pakistan’s middle class consists of over 6.27 million people, according to Credit Suisse, a global financial services company.

In its Global Wealth Report 2015 released on Oct 13, Credit Suisse said Pakistan has the 18th largest middle class worldwide.

The study revealed that 14% of world adults constituted the middle class in 2015 and held 32% of world wealth. The share of middle-class adults in Pakistan’s total adult population of 111 million was 5.7% in 2015 as opposed to India’s 3% and Australia’s 66% in 2015.

Middle-class Pakistani adults constituted 0.9% of the worldwide middle-class population. The highest concentration of middle-class population in 2015 was in China (108.7 million), followed by the United States (91.8 million) and Japan (62 million).

Read: Disproportionately: Taxation system not anti-poor but anti-middle class

Defining ‘middle class’

Economists use a variety of methods, such as income and standard of living, to define what constitutes the middle class. Credit Suisse uses the measure of ‘personal wealth’ – or a ‘wealth band’ instead of an ‘income range’ – to determine the size and wealth of the middle class around the world.

Taking the United States as the benchmark country, Credit Suisse considers an adult to be part of the middle class if they have wealth between $50,000 and $500,000 valued at mid-2015 prices.

Credit Suisse came up with the minimum and maximum figures for the US middle-class wealth band based on its median earnings and the amount of capital a person close to retirement age needs to purchase an annuity paying the median wage for the remainder of their life.

Read: Chinese middle class now the world’s largest

For the rest of the countries, Credit Suisse uses the IMF series of Purchasing Power Parity (PPP) values to derive equivalent middle-class wealth bounds in local terms.

Being a lower per-capita country, Pakistan has lower prices and consequently a reduced middle-class threshold. To be a member of the middle class in 2015, according to Credit Suisse, a Pakistani adult must have wealth of at least $14,413.

In terms of the local currency that buys one dollar for Rs104 these days, a Pakistani adult should be considered part of the middle class if they have wealth of between Rs1.5 million and Rs15 million.

With $14,413, Pakistan has the third lowest “middle-class lower bound wealth” for 2015, followed by India ($13,662) and Ukraine ($11,258). This suggests Pakistan has lower prices in general, which enables people to join the middle class by crossing a relatively lower threshold of wealth band.

Read: Minding middle class aspirations

Wealth in Pakistan

According to Credit Suisse, total wealth in Pakistan amounted to $495 billion in 2015. Given that the figure stood at $170 billion in 2000, total wealth in Pakistan has increased at an annualised rate of 7.4% for the last 15 years.

Total wealth of the world increased on average by 5.2% annually over the same 15-year period, the report shows.

A little more than 90% Pakistani adults had wealth less than $10,000 in 2015. The share of Pakistani adults with wealth between $10,000 and $100,000 in 2015 was 9.8% while only 0.1% adults owned wealth in the range of $100,000 and $1 million, the report revealed.

Published in The Express Tribune, October 16th, 2015.

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http://tribune.com.pk/story/973649/pakistan-has-18th-largest-middle-class-in-the-world-report/

 

[thethinker]

Value-added sector slams govt for giving no relief
Parvaiz Ishfaq Rana — Published about 18 hours ago
http://www.dawn.com/news/1214216/value-added-sector-slams-govt-for-giving-no-relief

KARACHI: Different segments of the value-added textile sector have criticised the government for providing relief only to the spinning and weaving industry and demanded immediate announcement of incentives to help them prop up falling exports and compete with regional peers.

Leaders of different segments of the sector agreed that the government was not fair to the industry which contributed up to 80 per cent in exports.

The sector also opposes regulatory duty on import of cotton yarn which, they say, will increase their cost of production by three to four per cent and make them uncompetitive on the world markets.

Even incentives like reduction in long-term finance (LTF) and export refinance only supported the spinning sector because the value-added sector was mostly operated by small and medium enterprises, they argued.

Exports cannot go up if huge refunds towards duty drawback and sales tax remained stuck up with the Federal Board of Revenue (FBR), lamented the leaders of eight value-added segments.

They urged the government to give 5pc duty drawback on exports and immediately withdraw cess of 0.25pc which is charged on all exports and around Rs5 billion is collected on this account. They reiterated their demand of zero-rating for all export-oriented industries and reduction in the rates of utilities like gas, electricity and water.

They urged the government to withdraw Gas Infrastructure Development Cess (GIDC) or at least bring the rates at par with the regional countries.

These stakeholders were also highly critical of the trade officers and the procedure of their appointment. They demanded that the government should introduce reforms to improve the level of civil servants which has deteriorated over the years.

Pakistan Bedwear Exporters Association (PBEA) Chairman Asif Javed said bedwear exports have been falling consistently since 2006 when they were $2.1bn.

Pakistan Readymade Garments Manufacturers and Exporters Association (Prgmea), Towel Manufacturers Association (TMA), Pakistan Hosiery Manufacturers Association (PHMA) and Pakistan Knitwear and Sweater Exporters Association (Paksea) said they were also facing the same situation.

However, All Pakistan Textile Mills Association (Aptma) Central Chairman Tariq Saud appreciated Finance Minister Muhammad Ishaq Dar and his team for their decision of protecting the domestic market from the dumping of highly subsidised imports of textile products.

“Unchecked dumping of textile products was hurting the sector and could have resulted in a large-scale shutdown of industries,” he maintained.

Published in Dawn, October 20th , 2015

 

[thethinker]

Islamabad airport now ‘9th-worst in the world’
http://www.dawn.com/news/1214543/islamabad-airport-now-9th-worst-in-the-world

ISLAMABAD: After being globally vilified as the worst airport in the world last year, the Benazir Bhutto International Airport (BBIA) has managed to claw its way back to respectability, dropping down to number nine on a 2015 list of the worst airports in the world.

Compiled by the website ‘Guide to Sleeping at Airports’, the list is put together on the basis of an annual of travellers who are asked to rate their airport experiences based on the services and facilities available within the terminal, cleanliness, customer service, comfort and their overall airport experience.

This year, the dubious title of worst airport went to Nigeria’s Port Harcourt International Airport, which was also described as the “most corrupt airport in the world”. Jeddah’s crowded King Abdulaziz airport came in third place, while the airports of Kathmandu, Tashkent and Kabul were ranked fourth, fifth and seventh worst, respectively.

The BBIA’s ranking no doubt benefitted from the recent facelift it received, including improvements to the terminal building, concourse hall, construction of a fast track building and a redesign of the airport’s infamous car park, as well as the business-class lounge.

However, corruption among airport staff and security personnel remained the most common complaint for reviewers on the Guide to Sleeping at Airports.

Published in Dawn, October 21st, 2015

 

[thethinker]

Plans to import power from India stalled

http://www.dawn.com/news/1214540/plans-to-import-power-from-india-stalled

ISLAMABAD: A plan to import up to 4,000 megawatts of electricity from across the eastern border to overcome Pakistan’s energy shortfall has stalled amid rising extremist sentiments in India following the ascension of Narendra Modi.

“How can we push for electricity import [from India] when those at the helm of affairs in India are taking an extremely anti-Pakistan posture,” a senior official from the Ministry of Water and Power told Dawn.

The Modi administration is not only taking a hawkish stance against Pakistan, but is also refusing to come to the negotiating table and is encouraging extremist groups to attack Pakistani visitors, including singers, writers and sportsmen, he said.

Take a look: Indian power plants worth $19bn struggle to find customers

Water and Power Minister Khawaja Asif told the Senate last week that Pakistani and Indian officials had discussed plans for importing 500mw from India in April 2012. Two years after these discussions, M/s Adani Enterprises Ltd (AEL) of India visited Pakistan in April 2014 to discuss matters related to the import.

In the written statement, the minister detailed how AEL had submitted a draft to the ministry, proposing the export of 500-800MWs in two-three years as a starting point, recommending an eventual scale-up to 3500-4000MWs. “But no further progress was made in this regard,” Mr Asif said.

The minister for water and power also informed the Senate about plans to import electricity from Iran and the Central Asian Republics of Tajikistan and Kyrgyzstan.

He said that Islamabad was currently negotiating with Tehran for the import of 1000MW, which could be increased to 3000MW, at an estimated tariff ranging between 8 and 11 cents per kilowatt hour.

Separately, Islamabad and Tehran are also in discussion for the import of an additional 30MW to add to the existing 74MW being supplied to Balochistan. In addition, import of 100MW of electricity from Iran was also being negotiated for the Gwadar port at a rate of 6.25 cents per unit.

However, because of the uncertainty over when sanctions against Iran would be lifted, the minister said the exact timeframe for actual power supplies could not be committed. Nevertheless, the import of an additional 30MW for Balochistan would be available by January 2016.

Regarding proposed power imports from the CARs, the minister said that agreements for procurement of electricity from the CASA-1000 project were currently under various phases of implementation.

Pakistan plans to import 1000 to 1300MW from the Tajik and Kyrgyz republics during the summer months, when electricity shortfall touches critical levels because of lower hydropower generation and increased demand.

The minister said that the feasibility study based tariff for the CASA-1000 project imports was put at 9.41 cents per unit in Pakistan. “The supply from the project will start during summer of 2018,” he said.

Published in Dawn, October 21st, 2015