This post briefly reviews two years of economic performance of the present government. What it inherited, what it informed the IMF and the people of Pakistan, why it went to the IMF, and where we stand now - are the subject matter of this article.
Pakistan positioned itself as one of the four fastest growing economies in the Asian region during 2000-07 with its growth averaging 7.0 per cent per year for most of this period. As a result of strong economic growth, Pakistan succeeded in reducing poverty by one-half, creating almost 13 million jobs, halving the country's debt burden, raising foreign exchange reserves to a comfortable position and propping the country's exchange rate, restoring investors' confidence and most importantly, taking Pakistan out of the IMF Program.
These facts were acknowledged by the present government in a Memorandum of Economic and Financial Policies (MEFP) for 2008/09-2009/10, while signing agreement with the IMF on November 20, 2008. The document clearly (but grudgingly) acknowledged that "Pakistan's economy witnessed a major economic transformation in the last decade. The country's real GDP increased from $60 billion to $170 billion, with per capita income rising from under $500 to over $1000 during 2000-07". It further acknowledged that "the volume of international trade increased from $20 billion to nearly $60 billion. The improved macroeconomic performance enabled Pakistan to re-enter the international capital markets in the mid-2000s. Large capital inflows financed the current account deficit and contributed to an increase in gross official reserves to $14.3 billion at end-June 2007. Buoyant output growth, low inflation, and the government's social policies contributed to a reduction in poverty and improvement in many social indicators". (see MEFP, November 20, 2008, Para 1)
Per Capita PPP GDP
A cursory look at the above stated acknowledgment is sufficient to see that the government deliberately misguided the people of Pakistan by presenting a totally distorted picture of the economy. While it could misguide the people of Pakistan for domestic political consumption, it had no option but to tell the truth to the international financial institutions as these facts were known to them.
Even the government did not inform the people of Pakistan that it obtained the IMF Program on the basis of past performance. Pakistan received the extra-ordinary funding from the IMF under the fast-track Emergency Financing Mechanism which was meant for the countries "that have a strong track record of sound policies, access to capital markets and sustainable debt burdens but need rapid help to overcome financial crisis". (IMF Survey, October 29, 2008) Thus, a government which starts its inning on distortion can never bring stability in the economy. Most of its time and energy would be consumed for covering up of its failure.
The present government inherited a relatively sound economy on March 31, 2008. It inherited foreign exchange reserves of $13.3 billion, exchange rate at Rs62.76 per US dollar, the KSE index at 15,125 with market capitalization at $74 billion, inflation at 20.6 per cent and the country's debt burden on a declining path. The government itself acknowledged in the same document that "the macroeconomic situation deteriorated significantly in 2007/08 and the first four months of 2008/09 owing to adverse security developments, large exogenous price shocks (oil and food), global financial turmoil, and policy inaction during the political transition to the new government". (Para 3 of the MEFP, November 20, 2008)
What went wrong? Why one of the fastest growing economies in the Asian region until two years ago has been totally forgotten in the region? Firstly, the speed and dimension of exogenous price shocks (oil and food) were of extraordinary proportions. Secondly, the present government found itself totally ill-prepared and clueless in addressing the challenges arising out of the shocks. While rest of the world was taking corrective measures and adjusting to higher food and fuel prices, Pakistan lurched from one crisis to another.
Despite peaceful election and a smooth transition to a new government, political instability persisted. For a protracted period there were no finance, commerce, petroleum and natural resources and health ministers in the country. The government lost six precious months in finding its feet. It gave the impression of having little sense of direction and purpose. A crisis of confidence intensified as investors and development partners started to walk away. The stock market nosedived, capital flight set in, foreign exchange reserves plummeted and the Pakistani rupee lost one-third of its value. In short, Pakistan's macroeconomic vulnerability had grown unbearable. It had no option but to return to the IMF for a bailout package. There were no Plan A, B and C. There was only one plan, that is, to return to the IMF.
While the country was moving rapidly towards the IMF, the ministry of finance had prepared the plan to bring $4 billion by June 30, 2008 through four transactions. A kick-off meeting was scheduled on April 23, 2008 at the ministry to give a final touch to the various roadshows. These transactions were canceled on April 20, 2008. Who ordered the cancellation of $4 billion transaction? This cancellation prompted balance of payment crisis and the rest became history.
The economy continues to remain in intensive care unit and is breathing thanks to the injections from the IMF, World Bank and Asian Development Bank. The economy is not on the radar screen of the government and as such the economic managers have no relevance in the current political set up. The exit of Shaukat Tarin is a classic example. At least he tried his level best to inject financial discipline but paid the price of teaching prudent financial management. No matter who replaces Shaukat Tarin, the economy would continue to lurch from one crisis to another until and unless the government brings the economy at the center stage.
Dr. Ashfaque Hasan Khan is the Dean of Business School at the National University of Science and Technology in Islamabad, Pakistan.
Riaz Haq's Comments: In rural Pakistan where about 60% of Pakistanis live, people spend 55% of their income on food, according to a World Resources Institute (WRI) report.
The bottom two BOP (Base of Income Pyramid) groups alone account for more than 50% of national food spending in Pakistan. Average annual food spending per household in the BOP in Pakistan is $2,643. While BOP3000 households have 6 times as much income on average, they outspend BOP500 households in the food market by a ratio of only 2:1 in Cameroon, 2.3:1 in South Africa and Pakistan, 2.4:1 in Kazakhstan, 1.9:1 in Uzbekistan, and 3:1 in Peru.
Currently, food inflation in Pakistan is running at 15.49 percent, hitting the poor the hardest.
Here's a video clip of British Writer William Dalrymple speaking about Pakistan at a recent Intelligence Squared debate:
Here is a recent video clip of former President Muharraf talking about the power crisis in Pakistan:
Related Links:
Incompetence Worse Than Corruption in Pakistan
Pakistan's Circular Debt and Load Shedding
Pakistan Planning Commission
US Fears Aid Will Feed Graft in Pakistan
Pakistan Swallows IMF's Bitter Medicine
Shaukat Aziz's Economic Legacy
Pakistan's Energy Crisis
Karachi Tops Mumbai in Stock Performance
India Pakistan Contrasted 2010
Pakistan's Foreign Visitors Pleasantly Surprised
After Partition: India, Pakistan and Bangladesh
The "Poor" Neighbor by William Dalrymple
Pakistan's Modern Infrastructure
Video: Who Says Pakistan Is a Failed State?
India Worse Than Pakistan, Bangladesh on Nutrition
UNDP Reports Pakistan Poverty Declined to 17 Percent
Pakistan's Choice: Talibanization or Globalization
Pakistan's Financial Services Sector
Pakistan's Decade 1999-2009
South Asia Slipping in Human Development
Asia Gains in Top Asian Universities
BSE-Key Statistics
Pakistan's Multi-Billion Dollar IT Industry
India-Pakistan Military Comparison
Food, Clothing and Shelter in India and Pakistan
Pakistan Energy Crisis
IMF-Pakistan Memorandum of Economic and Financial Policies
Here's the latest IMF assessment of Pakistan's economy as of Feb, 2010, as reported by Geo TV:
ReplyDeleteWASHINGTON: Pakistan’s economic growth has started recovering despite security and energy challenges and the country met almost all targets under the International Monetary Fund program, the global financial institution said Tuesday.
“Pakistan’s program is progressing well,” the Fund said in a statement following “constructive discussions” with Pakistani officials focusing on Pakistan’s recent economic performance, the outlook for the rest of the fiscal year.
Adnan Mazarei, who met with the Pakistani officials in Dubai over the past week to initiate discussions on the fourth review under Pakistan’s Stand-By Arrangement (SBA), noted that Islamabad observed all quantitative performance criteria for end-December 2009, except for the budget deficit target, which was exceeded by a small margin.
Listing positive trends Pakistan registered in recent months, the Fund said the exchange rate has remained stable at Rs. 84–85 per U.S. dollar and the international reserves position has strengthened (the banking system’s gross foreign exchange reserves, including the State Bank and commercial banks, reached US$14.3 billion in mid-February, of this total the State Bank held US$10.5 billion).
The early signs of recovery in some sectors and the improved external position are encouraging, although there are risks and challenges to Pakistan’s economic program.
“Economic growth in Pakistan is starting to recover; large-scale manufacturing output has started to increase, the improvement in the global economy has helped manufacturing exports, and private sector credit growth has picked up somewhat as businesses rebuild their working capital.”
The IMF’s package for Pakistan - approved in November 2008-has been extended to $11.3 billion.
Looking ahead, the IMF statement said, a resumption of higher growth is needed to raise living standards and will require improvements in the business climate to stimulate higher investment by local and foreign investors.
The financial institution also noted that the “resolve of the Pakistani authorities to implement their stabilization and reform program is a key factor in deepening macroeconomic stabilization, despite the risks associated with internal security and uncertainty as to the pace of global economic recovery.”
Emphasizing the need for stepped up donors support for the key anti-terror partner of the international communityy, the Fund said early disbursement of donor financing remains crucial to support Pakistan’s stabilization and reform efforts and laying the basis for a high and sustainable growth.
The IMF mission staff will prepare a report on the fourth review under Pakistan’s SBA that is scheduled for consideration by the IMF Executive Board in late March.
Here's recent news on Pakistan's telecom sector expansion, as reported in Daily Times:
ReplyDeleteDespite inching towards a saturation stage, the telecom sector received $1.438 billion in year 2008 and $815 million in the following year - 2009 as FDI in different projects in the ministry and its attached departments.
The total Internet users of the country rose to 19 million with total broadband users rising to 413,809 million. Total direct and indirect jobs in the telecom sector are 1.36 million.
During the past two years, the total phone lines increased from 94.695 million to 103.801 million with mobile lines increasing from 88.019 million to 97.58 million, almost 59.6 percent upward slide, while the fixed lines declined from 4.416 million to 3.526 million, almost 2.2 percent downward slide. The democratic government, after taking over in February 2008, came forward with policy reforms and policy directives for the telecom sector for year 2010.
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Pakistan Telecommuni-cation Authority (PTA) Chairman Dr Mohammad Yasin opined that Pakistan’s telecommunication sector was growing faster, even more rapidly than that of India with over 63 percent teledensity, encouraging the FDI.
“Look, India is lagging far behind Pakistan with 37 percent teledensity as compared to 63.5 percent in Pakistan. Pakistan’s FDI policy is much more liberal than that of India to attract more investment in Pakistan’s telecom sector,” he added.
The PTA chief was of the view that the ever-growing teledensity of Pakistan is unleashing new vistas of opportunities to the foreign and local investors for better returns, especially in the field of data services.
“Services like mobile Internet, mobile banking and Internet Protocol Television hold fortunes for any wise investor,” he added.
The Telecom analysts around the world still believe in Pakistan to be a lucrative market and business monitor forecasts that mobile subscribers in Pakistan would hit 100-million mark by next year.
The sector has been growing at a rapid pace where growth rates have become the hallmark. Although a bit slower growth, of only 7 percent, was observed in mobile sector last year, this trend cannot be attributed only to saturation as there are factors like international financial crisis, devaluation of rupee, security situation and re-registration of SIM program.
Here's a recent Dawn report on Karachi stocks performance:
ReplyDeleteForeign investment in the staggering sum of $57 million in two weeks, an unusual phenomenon, is acknowledged by brokers and analysts as the engine that has driven the market to the height.
Broker-turned-industrialist Arif Habib said that foreign funds had recognised Pakistan as a lucrative destination because of improved corporate profitability; a respite in internal political feuds, attractive valuations and high yields.
“The Pakistani stocks give out a yield of 5.5 per cent and the shares of profitable companies are trading on price-to-earnings multiple of seven times the forward earnings. That compares well with the yield of two per cent and p/e ratio of 17 times in the regional markets including India,” Mr Habib said.
Here's a report from The News about Pakistan's growing debt.
ReplyDeleteTuesday, March 30, 2010
KARACHI: Pakistan’s debt sustainability indicators deteriorated in July-Dec 2009 as external debt and liabilities were up, while foreign exchange earnings remained stagnant and the economy slowed down, the SBP said in its report.
The total external debt as percentage of GDP as well as debt servicing to export earnings ratio worsened during the period under review, the bank said. The stock of external debt and liabilities increased by $4.7 billion to reach $55.8 billion in the first half of the current fiscal year, it said.
External debt servicing was $2.648 billion by end of Dec 2009, up 9.7 per cent from the same period of the previous year, as the country repaid bilateral creditors, multilateral donors and private non-guaranteed debt. Yet, almost 25 per cent the increase in external debt and liabilities was due to depreciation of the US dollar against major currencies, the SBP in its report said.
Improvement in macro imbalances: KSE-100 records 8% return in 1Q 2010, says Daily Times:
ReplyDeleteBy Tanveer Ahmed
KARACHI: Robust foreign investment and gradual improvement in macro imbalances propelled the Karachi stock market to record eight percent return in the first quarter of 2010.
Following dismal performance in the fourth quarter of 2009, Pakistan’s benchmark equity index posted 8 percent return (8 percent in dollar) during the first quarter (January to March 2010) despite the political and security issues, whose intensity increased in recent weeks especially the deadlock on 18th Amendment.
“This is the second highest quarterly gain during the last one year, thanks to robust foreign activity and gradual improvement in macro imbalances,” Topline Securities analyst Farhan Seth stated.
Because of strong performance of equities, overall market capitalisation reached $34 billion whereas average volume during the first quarter of the current year stood at $76 million.
In March alone the equity prices rallied 5 percent led by $100 million net buying by foreign investors, after $32 million net inflow in the first two months of this year that inched up the index by 3 percent.
The comparison of the first quarter returns of the last 10 years show that, the last quarter gains are lower than the average gains. Interestingly, during the last decade, market average in the first quarter in any current year’s return was 14 percent.
The lower return this time is mainly due to exceptional gains of 60 percent (51 percent in dollar terms) in 2009 coupled with severe liquidity crunch being faced by local investors. Only local mutual funds’ net selling was at $54 million until March 30 due to continuous redemption pressure.
The sector-wise performance of the capital market indicates that fertilizer companies performed impressively due to robust earnings in the last quarter of 2009 and handsome payouts. FFBL was the star performer with 30 percent return, outperforming the index by 22 percent followed by Engro with 21 percent return while FFC outperformed the index by 2 percent.
On the other hand, OMCs (PSO and APL) and refineries’ (ATRL and NRL) remained laggards due to growing circular debt and lower refinery margins. Subdued refinery margins and lower capacity utilisation haunted refinery earnings, whereas despite better earnings circular debt remained the major issue for OMCs’. ATRL posted negative returns of 16 percent while NRL posted nominal 2 percent return where as PSO and APL posted 4 percent and 5 percent, respectively.
OGDC, the largest state-owned company with capitalisation of $6.3 billion, posted 17 percent return mainly led by huge foreign buying. Out of $132 million net buying so far in the first quarter of 2010, 30-40 percent is parked in OGDC, the analyst noted.
In rural Pakistan where about 70% of Pakistanis live, people spend 55% of their income on food, according to a World Resources Institute (WRI) report.
ReplyDeleteThe bottom two BOP (Bottom of Income Pyramid) groups alone account for more than 50% of national food spending in Pakistan. Average annual food spending per household in the BOP in Pakistan is $2,643. While BOP3000 households have 6 times as much income on average, they outspend BOP500 households in the food market by a ratio of only 2:1 in Cameroon, 2.3:1 in South Africa and Pakistan, 2.4:1 in Kazakhstan, 1.9:1 in Uzbekistan, and 3:1 in Peru.
Currently, food inflation in Pakistan is running at 15.49 percent, hitting the poor the hardest.
According to a recent Daily Times report, Non-perishable food item prices increased 14.76 percent whereas perishable food items recorded 21.30 percent increase in their prices.
Fuel & lighting index rose 20.19 percent during January this over the last year whereas house rent index posted 13.38 increase this month.
Transport & communication index rose 9.43 percent, education expenses increased 13.68 percent and medical expenses increased 5.88 percent.
The detailed analysis of the SPI prices for Jan-10 reveals that few items, within the food category, were observed to post over 100bps MoM increase in prices. Sugar (1.92 percent weight in the CPI) remained exceptional with 19 percent MoM increase and food prices (40.3 percent weight in the CPI) contributed passively this time around to the CPI in Jan-10 due to being relatively stable.
Here's a billion dollar LNG contract scandal uncovered by a complaint of the Fauji Foundation CEO, as reported by The News:
ReplyDeleteThe NA members were told that the petroleum ministry bosses had never recommended to the Economic Coordination Committee (ECC) to give the multi-billion dollar contract to French firm (GDF-SUEZ), whom surprisingly they all were religiously defending now.
It was disclosed that the petroleum ministry had actually recommended the award of the contract to Shell-Qatar, whose bid was higher than the French bid by $1.5 billion. But Shaukat Tarin had thrown this recommendation of the ministry in a dustbin after he learnt that he was being asked to award the contract to a party (Shell), whose bid was higher by $1.5 billion compared to the lowest bidder.
At the end of the hour-long presentation followed by a question-answer session, Chairman MNA Sheikh Waqas Akram, praised the journalist for his comprehensive presentation. Later, MD Fauji Foundation Lt Gen Rab Nawaz was said to have reiterated his old stance that his firm’s bid was the lowest if compared with the GDF-Suez, which was awarded the deal.
The committee met with Chairman Sheikh Waqas in the chair and was attended by MNAs Barjees Tahir, Nawab Yousuf Talpur, Wasan, Khurum Wattoo and others. Petroleum Minister Naveed Qamar, Secretary Kamran Lashari, Special Secretary G A Sabri and MD FF General Rab Nawaz attended the meeting.
Klasra told the committee that his story was based on the minutes of the ECC presided over by then Finance Minister Shaukat Tarin. The minutes had revealed that Tarin had got a telephone call from MD Fauji Foundation that the lowest bid given jointly by FF/Vitol had been rejected and the highest bidder GDF-Suez was given the lucrative contract. Tarin had informed MD FF that he was not aware of any such bidding because the petroleum ministry never shared such information in its official summary tabled before the ECC on Feb 9.
Consequently, Tarin had alarm bells ringing and had ordered a serious probe into the whole issue as to why the bid offered by FF/Vitol was not mentioned in the summary. But the petroleum ministry never replied to the queries of Tarin till he departed from his office at the end of February, much to the satisfaction of the petroleum ministry officials who thought that the issue had been buried but the publication of the scandal by The News shook them.
Petroleum ministry officials had even written a letter to Tarin, informing him that Minister Naveed Qamar had desired that they should not respond to him as he would “personally deal” with this issue. According to Klasra, he had contacted Shaukat Tarin to get his version about these startling developments and the ex-FM had confirmed on record that he was kept in the dark about the joint bid of FF/Vitol, which was claimed to be the lowest.
Tarin confirmed that he got no reply from the Ministry of Petroleum till he left the office. He also claimed that according to his calculation and information, there was a difference of one billion dollars in the bid price of the French company and FF/Vitol, so the country had suffered a loss of a billion dollar.
Minister Naveed Qamar is a close friend and ally of Zardari.
Here's a London trader Manraj Singh talking about Pakistan's KSE stocks potential:
ReplyDeleteTaliban and credit crunch or not, I expect to uncover some absolute bargain investments in this country. Three Pakistani companies that I have had my eye on have shares that trade in London. I think that they are worth a closer look.
Two long-term plays on Pakistan’s turnaround
United Bank(ticker:UBLS) is one of Pakistan’s top commercial banks. It focuses on servicing the corporate sector and has more than 1100 branches across the country. It has the big advantage of being backed by the colossally rich royal family of Abu Dhabi, the Al-Nahayans. The bank’s chairman, Shaikh Nahayan Mabarak Al Nahayan, is also the United Arab Emirates Minister of Higher Education and Scientific Research. So there doesn’t seem much chance of United Bank running into funding problems even if credit conditions in Pakistan stay tight.
Then there is MCB or Muslim Commercial Bank(ticker: MCBS). This is one of Pakistan’s biggest banks. It focuses on retail customers and has an impressive network of over a thousand branches and some 4 million customers. That makes it a good proxy for the long-term growth of the country’s middle class.
MCB is a highly professional organisation and it has attracted a big international shareholder base. Its biggest shareholder is the Malayan Banking group, which owns a 20% stake. And the Templeton emerging markets funds headed by investment bigwig Mark Mobius are also major shareholders.
Neither of these banks is dirt cheap right now. MCB’s share price has more than doubled since February and United Bank is up by some 80% over that period. They now trade at about eight times earnings. Not expensive, but not cheap either. But they are big, liquid companies and they will be among the first to benefit when international investors start looking at Pakistan seriously again.
Major banks are a good proxy for the performance of emerging markets. So as longer-term investments over the next 3-5 years, these two could pay-off massively.
And one punt for the brave…
On a completely different note is Lucky Cement(ticker:LKCS). Thisis Pakistan’s biggest cement producer. It is also a major exporter to countries in the surrounding region. It ships cement to neighbouring Afghanistan and India as well as to Ceylon and the Middle East. The region is still seeing strong economic growth and that has helped this company.
Lucky Cement has delivered impressive financial results . Despite the credit crisis, political upheaval and Taliban uprisings, profits have more than doubled this year. Its share price has risen by 148% since the start of the year. But it still trades at a reasonable five times earnings. It’s an interesting company, but not without risk. Its major cement production plant is located in the volatile North West Frontier Province where the Pakistani Taliban is active. Appropriately, its shares in Karachi trade under the ticker symbol LUCK. Here in London, its GDRs trade under the less ominous ticker symbol LKCS.
There’s more work to be done and I have other candidates I’m looking at. But I believe Pakistan will be an outstanding investment opportunity in the next few years. The time to get in is when investors fear to go there. That’s now.
I’ll get back to you when I have decided the best way to profit from Pakistan’s undervalued markets.
Till then, good investing.
Manraaj Singh
For The Right Side
http://www.fleetstreetinvest.co.uk/emerging-markets/asian-markets/pakistan-investment-opportunities-51623.html
Here's a Wall Street Journal story about Sialkot's soccer ball industry's struggle to survive:
ReplyDeleteAdidas contracted with Sialkot's Forward Group to make the replica World Cup balls. Forward Group expects to ship six million balls this year, up 40% from 2009.
But even with its Adidas contract, Forward Group faces big challenges. It has to run its own electric generators because of daily nationwide power shortages. The roads to Sialkot, in eastern Pakistan near the border with India, are rutted. And foreign sports executives remain reluctant to visit because of the terrorist threat.
German's Adidas Group has given one company in Sialkot, Pakistan, the contract to produce the entire range of mass-market-hand-stitched replicas of the "Jabulani" soccer ball that will be used at this summer's World Cup. The city, once the soccer ball capital of the world, is facing stiff competition from China. WSJ's Tom Wright reports.
Adidas made the decision to switch to thermally bonded balls for the matches at the 2006 World Cup. The goal was to make the balls perform more consistently when players kicked them. With a hand-stitched ball the seams inevitably produce dead spots. Initially, Adidas made those balls in Thailand before switching production to China ahead of the 2010 competition.
In recent years, China has also taken over most of the production of World Cup promotional balls, a lucrative market of about 40 million little balls emblazoned with sponsors' logos, says Khurram Anwar Khawaja, a soccer-ball producer and former president of the Sialkot Chamber of Commerce and Industry.
Sialkot has also lost a big share of midpriced mass-market soccer balls to China, which began producing cheaper machine-stitched balls a decade ago.
Forward Group and the other soccer-ball makers here are determined to defend their turf. They have cut costs by automating many parts of ball production. Local businessmen joined together to build an international airport in 2008 after the government failed to do so.
Now, the soccer-ball makers are planning to set up a research center to develop their own version of the latest thermal-bonding technology that Adidas is using for World Cup match balls, a process that involves fusing together patches of synthetic "leather" by machine.
Two years ago, Adidas transferred its proprietary technology to Forward Group, which has been making small amounts of thermal-bonded balls. Recently, the company successfully lobbied Adidas for permission to use the technology to produce balls for the UEFA Champions League final next month in Madrid, one of the biggest events on the global soccer calendar.
Pakistani banks are reporting strong earnings in 2010, according to a storyin Daily Times.
ReplyDeleteBank Alfalah announced 1Q2010 earnings of Rs 586 million (EPS Rs 0.43) in the first quarter of 2010, up 31%, from Rs 448 million (EPS Rs 0.33) recorded in 1Q2009.
“The earnings improved on the back of significant decline in provisioning expenses,” said Kamran Rehmani, an analyst at First Capital Equities.
The bank’s NII grew by 26% YoY to Rs 3 bn while this was up by 7% QoQ. Non interest income posted YoY decline of 23% on account of lower gain on sale of investments amounting to Rs 38 mn versus Rs 170 mn in the same quarter of last year.
In 1Q2010, provisions against NPLs declined to Rs 310 mn from Rs 555 mn in 1Q2009 and Rs 1.606 billion in 4Q2009, down 44% YoY and 81% QoQ. “We believe that the drop in provisions is likely due to the bank availing itself of further forced sale value benefit,” said Raza Jafri, an analyst at AKD Research.
Faysal Bank: Faysal Bank (FABL) reported record earnings of Rs 1.7 bn (EPS Rs 2.77) in 1Q2010, up from Rs 0.3 bn (EPS Rs 0.42) in 1Q2009 and Rs 0.5 bn (EPS PRs0.89/share) in 4Q2009.
“Massive profitability was due to one-time gain on redemption of NIT-Loc units,” said Rehmani. The bank’s NII posted healthy YoY increase of 12% to Rs 1.2 bn from Rs 1.1 bn in the same quarter of last year while this was 5% lower on sequential quarter basis.
Non interest income grew 4.5x YoY on the back of gain on redemption. Total provision charge in 1Q2010 declined to Rs 107 mn from Rs 313 mn provided in 1Q2009. During the quarter, the bank made reverse provisioning of Rs 189 mn against diminution on value of investments. Provisions against NPLs stood at Rs 298 mn, down 8% YoY and 31% QoQ.
Here's a recent excerpt from a piece by Dawn columnist Irfan Husain about Pakistan's middle class influencing nation's politics:
ReplyDeleteWhile external debt increased from $39bn in 1999 to $50bn in 2009, poverty levels have fallen by over 10 per cent since 2001. Indeed, there are now around 30 million Pakistanis who are considered to be in the middle class with an average income of $10,000 annually, while some 17 million are now bracketed with the upper and upper-middle classes.
Even though this does not approach China’s and India’s spectacular progress in this period, it does represent a solid advance. If one factors in the political turmoil the country has gone through, together with its ongoing insurgencies in the tribal areas and Balochistan, Pakistan’s progress has been impressive by any standard.
How do these numbers translate into day-to-day life in Pakistan? To examine the social transformation the country is undergoing, Jason Burke uses the Suzuki Mehran as a yardstick to measure change. In his ‘Letter from Karachi’ published in the current issue of Prospect, the Guardian reporter writes:
“In Pakistan, the hierarchy on the roads reflects that of society. If you are poor, you use the overcrowded buses or a bicycle. Small shopkeepers, rural teachers and better-off farmers are likely to have a $1,500 Chinese or Japanese motorbike…. Then come the Mehran drivers. A rank above them, in air-conditioned Toyota Corolla saloons, are the small businessmen, smaller landlords, more senior army officers and bureaucrats. Finally, there are the luxury four-wheel drives of ‘feudal’ landlords, big businessmen, expats, drug dealers, generals, ministers and elite bureaucrats. The latter may be superior in status, power and wealth, but it is the Mehrans which, by dint of numbers, dominate the roads.”
This growing affluence has already caused a major power shift, with the urban population now having a bigger say after years of being ruled by feudal landowners. As urbanisation gathers pace, Pakistan’s traditional power elite will increasingly come from the cities, and not from the rural hinterland. This will have a profound impact not just on politics, but on society as a whole. As Burke observes in his Prospect article:
“Politically, the Bhutto dynasty’s Pakistan People’s Party, mostly based in rural constituencies and led by feudal landowners, will lose out to the Pakistan Muslim League of Nawaz Sharif with its industrial, commercial, urban constituency. Culturally, the traditional, folksy, tolerant practices in rural areas will decline in favour of more modernised, politicised Islamic strands and identities. And as power and influence shifts away from rural elites once co-opted by colonialism, the few elements of British influence to have survived will fade faster.”
Often, perceptive foreigners spot social trends that escape us because we are too close to them to see the changes going on around us. For instance, Burke identifies the shift away from English, and sees ‘Mehran man’ as urban, middle class and educated outside the elite English-medium system. He sees Muslims being under attack from the West, and genuinely believes that the 9/11 attacks were a part of a CIA/Zionist plot. Actually, my experience is that many highly educated and sophisticated people share this theory.
Burke continues his dissection of the rising Pakistani middle class: “Mehran man is deeply proud of his country. A new identification with the ummah, or the global community of Muslims, paradoxically reinforces rather than degrades his nationalism. For him, Pakistan was founded as an Islamic state, not a state for South Asian Muslims. Mehran man is an ‘Islamo-nationalist’. His country possesses a nuclear bomb….”
i am a student of public adminstration my id ... and i want to know about :
ReplyDeletewhat are the factors that can bring change in financial industry of the world and spcially in pakistan?
hope you will answre soon it will help me regarding my rercent project .
regardz
anon: "what are the factors that can bring change in financial industry of the world and spcially in pakistan?"
ReplyDeleteAfter the major financial crisis that started in 2008, the most important thing that the financial markets need is restoration of investor confidence through more effective regulation...particularly of speculative vehicles like financial derivatives and other highly risky behaviors by investment professionals.
As to Pakistan, most businesses currently rely on bank loans rather than financial markets for their capital requirements. I think Pakistan's financial markets are still under development, particularly the debt markets which are needed to offer an alternative to equity markets (stocks) for investors and businesses.
Also missing from Pakistan is what is called venture capital to fund startups in new areas like software and technology.
For more, please read my post on financial services industry in Pakistan.
Here's a Dawn report on Pakistan risking IMF support by failing to raise taxes:
ReplyDeleteKARACHI: A delay in implementing a new sales tax in Pakistan after October may disrupt the delivery of vital assistance from the International Monetary Fund (IMF), finance officials and analysts said on Wednesday.
Pakistan was due to implement a value-added tax (VAT) or a reformed general sales tax of 15 per cent by July 1, but the 2010/2011 budget deferred imposition of the tax until Oct. 1 because of a failure to reach consensus among provinces.
Analysts said a delay in the latest billion-dollar tranche of funds from the IMF might cause a ripple effect on aid from other other multilateral agencies and donors.
“Failure to introduce the VAT would almost certainly jeopardise Pakistan's access to the remaining $4 billion under the IMF stand-by loan and $300 million under the World Bank,” Maria Kuusisto, Asia analyst at the London-based political risk research firm Eurasia Group, wrote in a note.
It could also keep Pakistan from extending the IMF loan beyond December 2010, she wrote.
Failure to impose the tax would be “serious business”, a Pakistani economist familiar with the situation said.
“No money will come from the World Bank or the Asian Development Bank either, and Pakistan will have a serious financing problem for their budget deficit,” he told Reuters.
The IMF and Pakistan are having talks and the programme is not in danger, said Asif Bajwa, special secretary at the Ministry of Finance. But the IMF itself is concerned.
“The delay in introducing the VAT could delay disbursements under the IMF program. We hope the VAT can be introduced soon so the IMF can move ahead with program reviews and disbursements,” IMF country representative Paul Ross told Reuters via email.
The IMF is due to meet in August to review Pakistan's progress against targets for the end of June before approving the next tranche, likely to be $1.1 billion to $1.2 billion.
On the brink of default, Pakistan turned to the IMF in November 2008 for a $10.66 billion loan package to help put its economy back on track. It received the fifth tranche of $1.13 billion last month.
In an effort to meet IMF conditions, the 2010/11 budget raised taxes on sectors like capital gains, increased a sales tax and slashed some food and energy subsidies. Pakistan's tax-to-GDP ratio of around 9.5 per cent is one of the world's lowest.
Cutting the deficit, targeted at 4 per cent of GDP for fiscal year 2010/11, is key but poses a serious inflation risk and could hurt the economy just as it tentatively recovers from its lowest growth rate in decades. Last year's deficit was 5.1 per cent.
“The tax collection target is grossly over-ambitious,” Ashfaque Hasan Khan, dean of Islamabad's NUST Business School, said when the budget was released earlier this month.
IMF's Dominique Strauss-Kahn has indicated approval of Pakistan's progress on economy, according to the following story from Dawn:
ReplyDeleteWASHINGTON: The head of the International Monetary Fund on Monday praised Pakistan's commitment to an 11.3 billion-dollar rescue package, despite a delay in setting up a nationwide tax.
IMF managing director Dominique Strauss-Kahn said that while Pakistan could not be considered a “normal country” in light of its wave of violence, the government has made a “good step forward” on economic reforms.
“There is a lot of concern but no real problem. I think they are going ahead rightly,” Strauss-Kahn said in a group interview. The Washington-based international lender approved the latest 1.13 billion dollars of the package in May and allowed two waivers on conditions, including giving the government the right to overrun the budget deficit.
As part of the IMF bailout, Pakistan agreed to impose a nationwide value-added tax to bolster government coffers and drum up badly needed funding to fight poverty.
But Pakistani leaders are squabbling over how to set up the tax. Some Pakistanis have voiced fear that the delay could lead to a cut-off in IMF support.
Strauss-Kahn acknowledged the IMF had “questions” about the tax and energy prices, but added: “I must say that a lot already has been delivered by the government.”
Another concern, Strauss-Kahn said, was to ensure that donor nations, informally grouped as the “Friends of Pakistan”, follow through with pledges.
“The question is... does the so-called Friend of Pakistan set of countries... really deliver and provide the resources, because all the resources needed are not supposed to come from the IMF,” he said.
Donors met in April 2009 in Tokyo and pledged 5.28 billion dollars to help stabilize Pakistan, which is the Islamic world's only declared nuclear weapons state and lies on the frontline of the US-led war on extremists in Afghanistan.
The US Congress last year approved a five-year, 7.5 billion-dollar plan to build roads, schools and democratic institutions in Pakistan. -AFP
There is an article in "Hindustan Times" reporting what it calls "Pakistan’s amazing shrinking private sector".
ReplyDeletehttp://blogs.hindustantimes.com/foreign-hand/2010/09/03/pakistans-amazing-shrinking-private-sector/
There is no question that Pakistan's economy has been stagnant since Musharraf's departure in 2008.
But let us remember that the small business sector companies, particularly the startups, have been the main engine of job growth in the United States for years, according to a Small Business Administration study released in March 2010. This where Joseph Shumpeter's "creative destruction" confirms the underlying dynamism of the economy.
http://www.sba.gov/advo/research/rs359tot.pdf
Let us also remember than only 10% of Pakistan's GDP is in the hands of the government, versus 17% in India.
But it is very encouraging to read in Hindustan Times that in Pakistan the "small scale sector remains marvelously active. GFCF in this sector between 2005 and 2009 has more than doubled. And firms with a paid up capital of less than Rs 50 million have gone from 568 in 2005 to 680 in 2009".
From NY Times today:
ReplyDeleteOf mounting concern to the Obama administration is the potential for serious unrest if the economy unspools further: inflation by some predictions will reach 25 percent in the coming period. The price of sugar has tripled, and the cost of flour has doubled since the government came to power nearly three years ago.
In particular, Washington wants the government to raise taxes on the wealthy landed and commercial class, a shortcoming that has become especially galling as Pakistan’s dependence on foreign donors rises.
The alarm about the economy was first sounded by Mr. Shaikh, a former officer of the World Bank, who told a government meeting last month that the government had only enough money to pay two months’ salaries. The economy was “teetering on the brink” before the floods but was now heading for the “abyss,” Mr. Shaikh was quoted as saying.
http://www.nytimes.com/2010/09/29/world/asia/29pstan.html?emc=eta1
Generals in Pakistan Push for Shakeup of Government
Here's a Business Recorder report on ADB's insistence on IMF prescribed reforms in Pakistan:
ReplyDeleteISLAMABAD (updated on: October 02, 2010, 19:37 PST): Pakistan should stick to an IMF reform programme in order to secure enough financial support to rebuild after devastating summer floods and stabilise its economy, the Asian Development Bank (ADB) said.
Heavy financial support was critical for Pakistan long before one of the country's worst natural disasters struck. An International Monetary Fund (IMF) reform package agreed in 2008 had helped keep the economy afloat.
Although pressure on Pakistan eased after the IMF approved a $451 million emergency fund to help it rebuild after the floods, the ADB said delaying reforms would only hurt the country.
"What Pakistan should not have a problem with is continuing with the reform agenda. I am sure actually (this would) underpin a lot of donor support for not only the floods but for the stabilisation of the economy," said Juan Miranda, ADB's director general for its Central and West Asia department.
"We must continue with the reforms. This is our position. That's the way in which you can help people in the longer run.
Pakistan turned to the IMF for an emergency package of $7.6 billion in November 2008 to avert a balance of payments crisis and shore up reserves. The loan was increased to $11.3 billion in July last year, and the central bank received a fifth tranche of $1.13 billion in May.
The emergency fund is not part of the loan programme. Under the loan programme, the government pledged to implement tax and energy sector reforms and show fiscal discipline. However, the country has been missing the IMF targets regularly.
"We still have a programme with the IMF, and that is not something that you stop and then you start again. The economy will benefit by a continuation of the reforms. It's not a question of just money," Miranda said in a telephone interview.
"My biggest worry is that the reform agenda gets derailed. That we lose momentum."
The World Bank and Asian Development Bank are completing a damage assessment for Pakistan, which will give the government and donors an estimate of how much rebuilding will cost.
The floods could knock Pakistan's economic growth this year to as low as 2 percent because of heavy damage to crops, said Miranda, lowering his forecast from 3 percent in late August. Pakistan's official target was 4.5 percent.
Pakistan's central bank said this week economic growth for fiscal 2010/11 could fall to 2.5 percent.
Agriculture is Pakistan's second-largest sector, accounting for over 21 percent of gross domestic product. Nearly 62 percent of the population depends on agriculture for their livelihoods.
Reconstruction could cost tens of billions of dollars. The World Bank said on Thursday it had approved over $400 million in credit to help Pakistan rebuild from massive flooding. It said the funds were part of the Bank's $1 billion commitment to Pakistan in this fiscal year.
The World Bank and the United States have urged Pakistan to take steps to reassure donor countries it is capable of using aid responsibly and that it can enact reforms.
Miranda agreed, saying periodic audits should be conducted and made available to the public through the media.
"It's not just following the rules but showing people that you have followed them. It has to be good, sound, smart oversight," he said.
Haq Sb,
ReplyDeleteThe comments posted by you are really informative and impressive.
Please summarize the Economy's performance for the last qtr of 2010 and its impact on the brokerage business, banking industry and foreign debt.
regards
Here is the latest news from State Bank of Pakistan reported by The Nation newspaper:
ReplyDeleteKARACHI – In the backdrop of widespread losses caused by the unprecedented rains and devastating floods to the economy in the early months of current fiscal year, the State Bank of Pakistan has predicted that the real GDP growth would be in the range of 2 to 3 per cent in FY11 against the annual plan target of 4.5 per cent.
The SBP, in its Annual Report on the State of the Economy for the year 2009-10 released here on Monday, stated that the annual average inflation for FY11 is likely to remain between 13.5 to 14.5 per cent, up from both, the 9.5 per cent target and earlier SBP forecast of 11.0- 12.0 per cent for the year.
Moreover, the provisional SBP projections indicate that the current account deficit will likely to rise between 3-4 per cent while the fiscal deficit is anticipated to be in the vicinity of 5 to 6 per cent of GDP during FY11. In addition, it projected that workers’ remittances are likely to stay between $9.5 billion to $10.5 billion whereas exports and imports are likely to be between $20 billion to $21 billion and $34 billion to $35 billion, respectively in the entire course of ongoing fiscal year.
The Report pointed out that financing even the moderate increase in the current account deficit may prove stressful for the economy, with rising pressures on the country’s foreign exchange reserves and exchange rate.
The Report said, “Negative shocks stemming from the floods have further exposed the existing structural weaknesses in the economy. Addressing these will require improvements in macroeconomic discipline as well as continued reforms to improve the resilience of the economy. The required reforms include those to improve productivity, strengthen public institutions, improve economic governance, and build social safety nets to protect vulnerable segments of the population.”
The Report while referring an independent study, warned that the occurrence of poverty, which started to decline over the last decade, is expected to increase in the wake of the floods in the time to come.
According to the Report, the direct impact of the flood-related supply shock is likely to be limited. For example, the impact of flood/rain damages and shortages of minor crops are not expected to persist beyond 2 to 3 months as supply line improves and as fresh crops (e.g., vegetables) enter the market. Similarly, for some other products, any rise in domestic prices would be capped by low international prices.
It is important to note here that prices of dairy products were already continuing on a secular rise, even prior to the floods, due to sustained strong domestic and external demand. Livestock losses in the flood would exacerbate this rising trend, but only to a small extent.
It said that the extended persistence of double-digit inflation had already been a source of concern even ahead of the floods, particularly given the risk that an upward trend in food-commodity prices (e.g. wheat, edible oil, sugar, corn, etc.) could be compounded by any weakness in the exchange rate. Moreover, inflationary pressures were also expected to strengthen as a result of the recent 50 percent increase in government sector salaries, and anticipated rise in energy tariffs (as the government continued to reduce subsidies) and removal of GST exemptions to broaden the tax base.
Here are some excerpts from a recent by India's Tehelka.com piece on the impact in South Asia of Swiss Bank secrecy law change forced by the United States:
ReplyDeleteSHAKEN BY the Swiss government’s recent announcement that it would reveal the names and account details of Indians who have stashed away an estimated $1.4 trillion ( Rs.62 lakh crore) in Swiss banks, the tax evaders are rushing the greenbacks back home. The Swiss are only waiting for the Indian Parliament to ratify the revised Double Taxation Avoidance Agreement (DTAA) that the two countries signed in August. The revised treaty is also likely to ensure that henceforth global shipping companies will be required to pay tax on their profits only in their country of domicile. Currently, though India has DTAAs with 79 countries, not all of them have provision for exchanging taxation-related information..............
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As for the Swiss government, it could soon push its banks to exchange information related to the tax evaders’ bank account details, as per norms set by the Paris-based Organisation for Economic Cooperation and Development. The move is believed to have been prompted by intense pressure from G-20 nations. “This is worrying many Indians who have money stashed away in those banks,” says Jethmalani, adding: “So they are taking out their money and, for the time being at least, investing heavily in the market.”
And this has been happening in Pakistan as well, ever since the Swiss Parliament’s historic move to pass the Return of Illicit Assets Act (RIAA). There, too, the tax evaders have started transferring billions of dollars from their Swiss bank accounts to secret destinations in Europe and Asia. According to recent estimates, roughly $200 billion — four times the external debt of Pakistan — is stashed away in Swiss banks and is now being withdrawn. Top sources in Lahore say they have evidence that Pakistanis are moving their black money to two destinations — London and Islamabad — via PN, and opening sub-accounts with FIIs. “Our problems are similar. They are making everything above board, everything official,” said Ali Mohammed, a broker at the Karachi Stock Exchange.
Earlier this month, Christa Markwalder, president, Foreign Affairs Committee (Presidentin Aussenpolitische Kommission des National Rats) of the Swiss Parliament told Tarun Vijay, MP and national spokesperson of the Bharatiya Janata Party, that she had recently explained to Finance Minister Pranab Mukherjee about how the matter could be resolved to India's satisfaction. Incidentally, Vijay was the first to directly contact the Swiss government in this regard. But Jethmalani feels India is not pressing the Swiss hard enough. “Soon, there will be a crash of an unusual nature in the markets — because even if the Swiss government is keen, the Indian government does not seem to be keen to push the agenda,” says Jethmalani.
Here is a Daily Times report on inflation in Pakistan:
ReplyDeleteIn Pakistan, 2007, the rate of inflation was 12.5 percent, during 2006-07 it was 21 percent and in July-March 2010 the inflation has been 11.3 percent. The cumulative rate of inflation was 44 percent in three years, from September 2007 to September 2010.
The main reason of food prices inflation was the increase in wheat, petroleum products, electricity and gas responsible to an overall increase in prices. The rising interest rate, high remittances and depreciation of rupee against dollar also fueled the inflation. This situation directly hit the poor and increased poverty level in the country.
A shortfall in the production of some essential commodities also raised food prices. There are 13 food items in essential items’ list which also includes wheat and flour; sugar, poultry, mash pulse, meat, milk, tea, fresh vegetables etc, that account for almost 23 percent of the total weight in the Consumer Price Index (CPI). Prices of food items in general have made food dearer in Pakistan. For instance, the average price of sugar has risen above 41 percent, wheat prices by 17 percent, chicken 24 percent, beef 13 percent and onion prices by 64 percent since July 2008 over April 2009. With a 23 percent weight in CPI, the contribution of these few items to the overall CPI inflation was 18 percent.
Although the world price of sugar has fallen unexpectedly since its peak in January 2010, but it is still up 21 percent year on year (YoY) basis. Dairy prices, on the other hand, have continued to raise their upward march.
Global price increase enhanced inflation sharply and Pakistan has no exception that has affected both globally as well as domestically. India’s food price inflation soared to 19.2 percent in December 2009, 16.7 percent in March. Similarly, food inflation in Bangladesh rose from 3.3 percent in July 2009 to 10.9 percent in February 2010.
Poverty ratio in Pakistan is rapidly rising due to economic slowdown; high inflation and reduction in subsidies compel 40 percent people of the country to lives around the poverty line, as per SBP estimates.
The country’s population has jumped to 184 million in 2010, 119 million in 1990, of which 73 million Pakistanis have fallen below poverty line, SBP said. The poverty level during 2010 rises by 4 percent to 40 percent, from 36.1 percent in 2009.
In the case of Pakistan, the increase in domestic prices of essential commodities remained relatively quiet as compared to the international price movements. However, since January 2010, international prices for some of the commodities like petroleum have fallen more rapidly than in Pakistan.
Here's Dr. Ashfaque H. Khan, Dean of NUST Business School, opposing SBP's latest 0.50% discount rate hike in Pakistan:
ReplyDelete...another objective of tightening monetary policy is to discourage the government from borrowing heavily from the SBP to finance fiscal deficit. Government borrowing from the SBP is the main source of the surge in reserve money growth. During the last four-and-a-half-months, the government has borrowed Rs265 billion, against Rs16 billion in the corresponding period last year. As a result, reserve money has grown by 18.4 per cent, against 9.7 percent last year.
Perhaps the SBP believes that a rise in discount rate will discourage the government from borrowing from the central bank. The SBP has forgotten that by raising the discount rate by 100 basis points in the current fiscal year, it has increased the interest payment of the government by almost Rs50 billion. Thus, everything being held constant, the budget deficit will increase by Rs50 billion. Hence, more deficit, more borrowing, a further hike in the discount rate, further increase in interest payment, and further increase in budget deficit. Do we want to create a vicious circle?
Perhaps the SBP believes that by increasing the discount rate it will encourage commercial banks to participate actively in auction of government debt. In other words, it will shift government borrowings from the SBP to scheduled banks. Government borrowings from the scheduled banks stood at Rs76 billion, against Rs164 billion in the same period last year. Perhaps the scheduled banks are deliberately avoiding participation in the auction to the extent they should have been. They have thereby signalled that they need a higher interest rate.
Should the SBP, as monetary authority, be guided by the animal spirit of the scheduled banks, or should it be in the driving seat? Perhaps the governor of the SBP would like to be guided by the scheduled banks. I personally believe that the hike in discount rate was unwarranted and the status quo should have been maintained. The hike was an act of overreaction and could have been avoided.
Here's a Daily Times report on Gallup survey finding Pakistanis are pessimistic about their nation's economy in 2011:
ReplyDelete“This year, the public opinion in Pakistan is not hopeful as only 13 percent think that 2011 will be a year of economic prosperity while 34 percent expect it to be a year of difficulty thus giving a negative score of –21 percent on Net Hope,” said Chairman Gallup Pakistan Dr Ejaz Shafi Gilani.
“The devastation caused by floods during the middle of the year created a mood of economic pessimism among the public, despite the fact that the country fought this calamity with courage and showed extraordinary resilience,” Dr Ejaz added.
As the new century enters its second decade, both economic data and perception data suggest that while wealth is still concentrated in Europe and North America, while there is a shift of power and prosperity from the West of the 20th Century to the East, he added.
He said these findings have been derived from one of the largest global surveys covering 53 countries across all continents including all the G7 countries, the four countries of emerging BRIC (Brazil, Russia, India and China) and another 45 countries from Asia, Africa, Latin America, Australasia and including Pakistan. Together, a sample of over 64,000 scientifically selected men and women were interviewed by leading pollsters associated with Gallup International.
This is the second global survey, which the Group has conducted and released during this month. The key question in the global survey was: “Would you say that 2011 will be a year of Economic Prosperity, Economic Difficulty or remain the same.” At a global level 30 percent of the world expects that 2011 will be the year of prosperity and 28 percent expect it to be the year of economic difficulty, while 42 percent think the economic situation will remain unchanged. The hopefuls outscore the pessimists by 2 percent. That is the net Global Hope Score.
The data shows that global hope is highly concentrated among the rising economic powers, the so-called BRIC. The Hope Score for this Group is 35 percent.
In sharp contrast, the Hope Score for the rich countries of the world, known as the G7 (USA, Canada, Germany, France, UK, Italy, and Japan) is in the negative: -19 percent.
Among them, the Pessimists (36 percent) outscore the Hopefuls (17 percent) by 19 percent points.
Briefing the journalists about the survey here Wednesday, Dr Ejaz Shafi Gilani chairman Gallup Pakistan claimed that comparing the survey data with India, it must be noted that Hope Score are volatile and can make sharp jumps in short years.
“This would be true of the mood in India. In the latest survey popular opinion in India shows a Net Hope of 24 percent.
In previous years, India generally scored lower than Pakistan on such measures. Even now the per capita income in the two countries is not far apart $3260 in India compared with $2710 in Pakistan,” he said adding that our civil society and the government seem to have a tough task ahead of them in 2011. app
Here's Pakistan's latest economic news in brief supplied by Foundation Securities Research:
ReplyDeleteThe Ministry of Finance has agreed with the proposal of the Tax Reform Co-ordination Group (TRCG) to create a Fiscal Policy Board to be headed by the Finance Minister under the reform plan to exclusively deal with the fiscal policy and taxation issues under the umbrella of the proposed fiscal board. (BR)
The country's trade deficit soared to $8.149 billion in July-December 2010, 18.20 percent up over $6.89 billion for the same period of last year, according to the Federal Bureau of Statistics (FBS). Official trade figures released by the FBS here on Tuesday showed an increase in exports of 20.63 percent for the same period which analysts say could be largely because of per unit price increase instead of increase in the quantity. (BR)
Remittances sent home by overseas Pakistanis continued to show rising trend as $5,291.41 million was received in the first half of the current fiscal year 2010-11(July-December), showing an increase of $761.23 million, or 16.80 percent, when compared with $4,530.18 million received during the same period of last fiscal year. (BR)
The CPI inflation soared by 15.68 percent in December 2010 over the same period of last year with phenomenal increase in perishable food items, showing a strong trend of increase in prices of food items which may push more people below the poverty line. (BR)
Japan has queued up to help Pakistan to plug in widening budgetary gap by granting it $60 million soft loan in response to Islamabad's call to the friendly countries for financial support to keep current budget deficit at some reasonable level. (BR)
Another round of speculations came to an end on Tuesday when President Asif Ali Zardari issued a notification appointing a PPP stalwart and former Attorney General Sardar Latif Khan Khosa as Governor of Punjab. (BR)
The monthly Consumer Price Index (CPI) during the month of December registered a decrease of 0.31 per cent as compared to previous month of current financial year. (DAWN)
The government has decided to put a freeze on electricity tariff for the remaining period of the current fiscal year owing to its inflationary impact on economy and unending loadshedding, according to a senior official. (DAWN)
The Secretary Cabinet Division, Abdur Rauf Chaudhry on Tuesday said 3G services would hopefully be available to the Pakistani mobile users by the end of 2011 — while it was expected that the policy for auction of 3G services licenses would soon be presented to the government and Economic Coordination Committee (ECC) for discussion and approval. (DT)
The FBR has started to evaluate alternative proposals to replace the controversial RGST in case the government failed to get it approved from the parliament. (TN)
Despite receiving orders from the Ministry of Petroleum, OGDCL has not replaced one of its directors on board, who also works for a partner company. (TN)
NCCPL shows a net inflow of USD2.18 million.
Crude oil is trading at USD91.1 per barrel.
Is the following a fake cable from Amb. Munter in Islamabad?
ReplyDeleteThe fake cable says: Having been in Pakistan since October, I am forwarding a brief review of my first personal impressions.
1) View about America: Survey after survey has shown that the populace at large has very unfavorably views US government and policy. The perception in the corridors of power is very different. Given their propensities to focus on conspiracy theories most of them have a notion of US influence in Pakistan that far exceeds our real capabilities. Sometimes I feel as the “Governor General” from a bygone past caught in a historic time warp. From the highest office down to midlevel functionaries, perception becomes reality, when it comes to viewing US as the kingmaker. This mostly helps us in stacking the deck of cards in our favor but also works against us at times when diplomacy is seen as failing. The dilemma for our policy is incongruence between our objectives and the popular sentiment of the people in Pakistan. Changing this is not merely a matter of perception and has to be more than a public relations exercise. It will require a significant change in our strategic trajectory.
2) The Social divide: Having served in Iraq I have experienced the divide between the elites and the common citizen, which is quite typical of the Middle East and South Asian countries. In Pakistan however it takes unparalleled heights. My first private party at a key minister’s residence, the opulent lifestyle was in full contrast to the plight of those serving us. White gloved waiters were standing with ashtrays so that the corpulent minister and guests could smoke their Cuban cigars at will, and with utmost disdain flicker the ash at random intervals to be caught by the gloved waiter with unsurpassed skill. Alcohol, which is, otherwise not in public display in this Islamic country was flowing from an open bar. Our hosts were shocked that most of the American guests did not drink. I was taken aback at the presence of so many blond Pakistani women, on inquiring was told by our bemused social secretary about the miracle of peroxide and modern hair coloring which seems to be the fashion statement of the day for well groomed (sic) modern Pakistani women. As we pulled out to leave, the sight of an army of drivers was something to behold, huddled in the frigid night until the wee hours, for the masters to terminate their fracas. Service is legitimate but this smacked of servitude, opprobrium reminiscent of attitudes of European aristocracy and our own experience with slavery.
3) Hypocrisy a new dimension: I was stunned to hear form a very senior political functionary about US interference in the internal affairs of the country. When pointed out that this interference could be curtailed if the government of Pakistan would refuse to take billions of dollars in US aid annually, his response was that monies were for services rendered in the fighting terrorism. Purloin of developmental funds to support the prodigious lifestyle of the ruling elite seems to be the normative. This can be only rationalized as a self-entitled narcissism of a collective of people with a rapacious appetite to loot the country.
Contd..
Fake Cable contd:
ReplyDelete4) The common man: My contact has been limited but even with limited exposure they continue to amaze me. In abject poverty and mired in the maelstrom of illiteracy they display a dignity and authenticity that is in stark contrast to the capriciousness of the pseudo westernized elites. Hospitable to a fault and honest despite being in the vortex of poverty the common everyday people of Pakistan display great ingenuity to survive against formidable odds, a gristle of the soul, that must come from a past rooted in spiritual life of a different sort.
5) Democracy: In Pakistan democracy has taken a dimension that borders on mockery of true representative government. The elected representatives come almost exclusively for the elite and privileged class. Rather than representing the populace they are more like local regional ‘viceroys’ representing the federal government and their own vested interests in the regions.
Most are in politics not with a sense of public service but more to maximize the opportunity to make money, which they do with total disdain. The mainstream political parties are oligarchies controlled by the founding patriarchs or their heirs. One wonders if this is the model, we seek to perpetuate? Given my background as a history professor I have my druthers.
6) Alchemy of change: The polarization in the society makes significant change likely in the near future but given the deficit of leadership and organization it is not inevitable. This situation is unlikely to be remedied in the short term. If such a leadership were to emerge then conflict between the polarized segments would likely ensue. Under these circumstances we will not be able to count on the military as a stabilizing force. The military though a disciplined and well led, is a egalitarian body with much of its leadership and rank coming from middle, lower middle and poor classes. Their support of any move to perpetuate the rule of the elite will be at their own peril. The current military leadership is unlikely to prop the existing structure if such a conflict was to occur and possibly may even be catalytic toward such change. This is in stark departure form the past.
Pakistan is a fascinating place the contradictions are glaring but the promise is great, ironically what may be good for Pakistan may at least in the short term not be good for furtherance of our policy goals. We need to take a long view and it may be worthwhile to cut our losses, uncouple from the ruling elite and align our self with popular grassroots sentiment in the country. This would change our perception in the short term and when change does come we, for a change, will be on the right side.
Pakistan's top tax man paints gloomy picture of economy, reports The News:
ReplyDeleteKARACHI: Chairman of the Federal Board of Revenue Salman Sidiqqui has said that the government cannot provide a bailout to the industrial sector as the regime is facing an unannounced economic emergency.
He stated this while addressing a ceremony under the aegis of the Karachi Chamber of Commerce and Industry here on Saturday.
Talking to the media on the occasion, the FBR chairman said that the government was trying to curtail loans to control inflation.
The current amount of loans stands at Rs140 billion not 500 billion rupees, he added.
He said in the first phase, the Islamabad Electric Supply Company (Iesco) would be privatised, adding that the economic sector was facing a crisis and the government could not meet its expenditures.
He questioned how it could be possible to provide resources to the business community in these circumstances.
The FBR chairman pointed out that no one would come forward from abroad to provide a bailout package for the restoration of the economy.
"We should resolve our problems and every citizen should be brought into the tax net," he added.
The FBR chairman suggested that a ban had to be imposed on the government from borrowing from the State Bank.
Policymaking is not the responsibility of the FBR but its function is its implementation.
He advised tax defaulters to contact the actual department for the solution of their problems. The FBR is working for the welfare of various departments.
It is not difficult to overcome the issue of economic deficit through local resources, he underlined.
To a question, he said that the economic downfall started after the government borrowed loans from banks.
Salman Sadiqqui urged businessmen not to attach any expectations to the government as it was facing economic problems.
He suggested traders should set up representatives of the business community for the solution of their problems regarding tax.
On this occasion, a KCCI member, Qasim Teli, said that traders were facing several problems about tax, adding that the traders wanted to pay tax but the policy of the government should be clear in this regard.
The government should improve the tax system. He demanded an end to corruption in the FBR.
Referring to various complaints on export refund claims, the FBR chairman said that a committee of the KCCI should be formed by the chamber office-bearers, who could help the board in resolving the claims of exporters.
"I assure you that all the refund claims will be made expeditiously as compared to the past and non official malpractices will be tolerated," he added.
The FBR chief said that the Board's Revenue Advisory Council will be asked to have a working relationship with the KCCI and further gave an assurance to the business community members that functions of the FBR will be restructured after consultation with the members of the chamber.
In addition to significant foreign institutional investments (FII) in Karachi shares last year, the reports of surging remittances by overseas Pakistanis and the nation's growing exports are the only two other pieces of good news amidst an avalance of bad news on the economic front in Pakistan in 2010.
ReplyDeleteThe State Bank of Pakistan has reported that overseas Pakistanis sent home $5.291 billion during July-Dec, 2010, an increase of $761 million or 17 per cent year over year, according to Pakistan's Dawn newspaper.
Remittances of $863 million were sent by overseas Pakistanis last month, up 23.72 per cent or $165 million compared to December, 2009.
Exports in the July-December 2010 touched almost $11 billion – $1.8 billion, or 20.6per cent, higher than last year’s exports in the corresponding period. Meanwhile, imports stood at $19.2 billion, marking a growth of 19.6 per cent, or $3.2 billion, in the first half, according to the Express Tribune.
Pakistani government has been relying heavily on remittances by overseas Pakistanis to fund the massive trade imbalance, which exceeded $8 billion during the first six months of this fiscal.
The increased remittances and rising exports have helped bring down the nation's current account deficit to $504 million for six months, or 0.6 percent of GDP, about 30% lower than the same period in the previous year.
Foreign direct investment (FDI) declined 15.5 per centin the first six months of the current fiscal year to $828.5 million from $968.9 million in the same period last year, according to the Nation quoting figures from the State Bank of Pakistan.
However, in spite of Pakistan's multiple serious crises, the foreign buyers have continued to be relatively sanguine about Pakistan's prospects.
Pakistan is Striving for Consensus to Spur Ailing Economy, Says Businesswek:
ReplyDeleteJan. 20 (Bloomberg) -- Pakistan’s government and the main opposition met today in a bid to hammer out a consensus on ways to contain the nation’s expanding budget deficit and revive an economy battered by terrorism and floods.
Prime Minister Yousuf Raza Gilani’s economic team, led by Finance Minister Abdul Hafeez Shaikh, will begin “substantive and meaningful” negotiations with its chief rival, the Pakistan Muslim League of former prime minister Nawaz Sharif, Ahsan Iqbal, a spokesman for Sharif, said in a phone interview in Islamabad today.
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Any political agreement on a reform program will force the government to cut spending by 30 percent, restructure state- owned money-losing companies, including Pakistan International Airlines Corp. and Pakistan Steels, and set a new price mechanism for power and gas consumers, Iqbal said.
“Politics is driving economic decision making here,” Abid Qayum Sulehri, executive director at the Islamabad-based Sustainable Policy Institute, said in a phone interview. “This will provide Gilani much-needed political cover to take tough economic decisions.”
The government’s economic team met with Sharif’s party, Pakistan Muslim League-Quaid, and coalition partners Muttahida Qaumi Movement and Awami National Party on Jan. 18 to brief them about the state of the economy. Gilani reached out to the opposition after Sharif demanded the premier implement a 10- point economic agenda within six weeks and move against corrupt officials or face a campaign for his ouster.
The Karachi Stock Exchange’s 100 Index, which advanced 28 percent last year, fell 1.3 percent to 12,411.87 today in Karachi. The rupee traded at 85.73 against the dollar, after falling 1.65 percent last year.
“I’m not too optimistic that this political give-and-take will change things substantially on the ground,” said Asif Ali Qureshi, head of research at Invisor Securities Ltd. in Karachi. “Investors usually get nervous when foreign exchange reserves start shrinking and the currency comes under pressure. That hasn’t happened so far this year.”
Partner Returns
Gilani on Jan. 7 succeeded in winning back the support of his partner, the MQM, after reversing the fuel-price rise. His Pakistan Peoples Party lost its majority Jan. 2 when the MQM had quit the coalition. President Asif Ali Zardari’s grip on power was further undermined by the Jan. 4 assassination of a key aide, the governor of the Punjab province.
The petrol-price rollback, which runs the risk of a wider budget deficit, was criticized by U.S. Secretary of State Hillary Clinton, who urged Pakistan not to “reverse progress.”
“We have moved forward in a concrete way,” Ishaq Dar, a former finance minister and a key aide to Sharif, told reporters after the meeting. “You’ll see things moving in the next few weeks.”
Maria Kuusisto, an analyst at consultant Eurasia Group, said in a Jan. 14 telephone interview from London, that Pakistan’s budget shortfall may touch 8 percent of gross domestic product, or 1.3 trillion rupees ($15.15 billion) in the year through June from 6.3 percent in the previous year.
The central bank governor last month blamed government borrowing for price pressures and said raising interest rates may impede investments and undermine economic growth.
The government borrowed 401 billion rupees from the central bank between July 1 and Jan. 8, more than double the amount it borrowed in the same period last year, according to data from the State Bank of Pakistan.
“Pakistan is operating without any fiscal order,” Sakib Sherani, an economic adviser in Pakistan’s finance ministry from July 2009 to December 2010, said in an interview. “The fiscal mismanagement may produce the biggest budget deficit in Pakistan’s history in absolute terms.”
Here are excerpts from a report on Pakistan's retail sector:
ReplyDeleteThe ongoing shift in population from rural to urban areas has underpinned the expansion of the retail sector. Strong real GDP growth until fiscal year 2006/07 (July-June) provided the foundation for years of double-digit growth in net retail sales in US dollar terms. However, net retail sales contracted by 1.2% in 2008. Sales then grew by only 5.7%, to US$75bn, in 2009, as the inflationary surge of 2008, which reduced spending power, abated only moderately. In local-currency terms retail sales growth in 2009 is estimated at 22.7%, owing to depreciation in the value of the Pakistan rupee against the US dollar. A gradual shift towards more formal retail facilities will facilitate the expansion of sales in 2012-14, but this process will be slow and confined to urban areas. (In 2010-11 retail sales expansion will be subdued, as overall private consumption growth slows sharply owing to the catastrophic floods that struck Pakistan in August-September 2010. Electronic retailing is almost nonexistent in Pakistan because of the low levels of Internet penetration and credit-card use in the country.
Consumer finance accounted for 4.2% of the total stock of credit in the country in June 2010, according to the State Bank of Pakistan (SBP, the central bank). Credit for purchases of consumer durables was down by 25% year on year..... Because of their limited financial resources, most retailers sell on a cash-only basis. This is gradually changing, and credit-card use is likely to become an increasingly important element of personal finance in the long term. However, in the short to medium term credit-card use will be constrained by the poor economic climate: outstanding credit-card loans were down by 25% year on year in June 2010. Large, centralised shops have not been popular in Pakistan, as low levels of car ownership mean that people prefer "corner shops" near their homes. More importantly, frequent and often prolonged power failures reduce the advantages of refrigeration, leading to a preference for fresh goods bought for immediate consumption from neighbourhood retailers. Online retail sales are negligible, owing to the country's extremely low levels of Internet penetration and credit-card ownership and the absence of Internet merchant accounts to facilitate online credit-card transactions.
The retail market is highly fragmented and underdeveloped. There are over 125,000 retail outlets across the country, according to the Small and Medium Enterprise Development Authority, but around 95% of these are tiny corner shops. The few supermarkets that exist are concentrated in Karachi and Lahore. USC is the largest supermarket chain by far, with 5,850 outlets throughout the country in 2009, according to Planet Retail, an international industry consultancy. The other major chains are Whitbread (with 17 outlets in 2009), GNC (with six outlets), Metro (five outlets) and Carrefour (one outlet). However, even USC's market share is virtually insignificant in terms of retailing as a whole, according to Planet Retail, accounting for only 1.2% of total grocery spending in the country. The vast majority of retailers in Pakistan are small family-run shops, and this will remain the case throughout the forecast period (2010-14).
Here's a story in the Economist on economic mismagement in Pakistan:
ReplyDeleteON JANUARY 3rd Pakistan’s central bank began printing rupee notes carrying the signature of Shahid Kardar, who was appointed governor of the State Bank of Pakistan in September. Unfortunately inflation has robbed money of over 15% of its value in the past year, and no let-up is in sight for the new notes. It is the most visible sign of an economy slouching towards another financial crisis.
At the start of the year the government raised petrol prices, prompting the Muttahida Qaumi Movement (MQM) to quit the coalition government led by the Pakistan People’s Party (PPP). It left the PPP “with a choice between saving the government and saving the economy,” as Maleeha Lodhi, Pakistan’s former ambassador to the United States and Britain, put it in the News, a Pakistani daily.
On January 6th the PPP made its choice, reversing the price rise. The decision has rescued the government but also robbed the exchequer of 5 billion rupees ($58m) a month. By the end of the fiscal year in June, the government’s deficit could reach 6.5% of GDP, according to Sayem Ali of Standard Chartered bank, or even 8% if oil prices continue to rise, according to Mohsin Khan of the Peterson Institute, in Washington, DC.
Pakistan’s budget has a lot to bear. The World Bank reckons that recovering from the summer’s devastating floods, which damaged over 1.6m homes, will cost up to $10.8 billion. To date, aid has been modest. Donors have pledged just $2.1 billion, or $11 per person, compared with $363 per person promised to Haiti after its earthquake —a slightly unfair comparison perhaps.
Yet Pakistan’s fiscal troubles are antediluvian. It is one of the most lightly taxed countries in the world. Fewer than a quarter of the country’s firms declare any taxable revenues, and only 11 out of every 1,000 of its citizens pay tax on their incomes, according to the World Bank. As a result, tax revenues amount to a mere 10% of Pakistan’s GDP.
The government had hoped to raise that ratio by broadening its sales tax, which is riddled with exemptions. Yet it lacked the heart to defy lobbies which slip through the threadbare tax net. They include exporters who escape tax on their domestic sales, as well as retailers and wholesalers who elude tax altogether. The proposed reforms also proved unpopular with the broader public, who resent paying anything to a government that gives them so little in return.
The government’s failure has jeopardised its agreement with the IMF, which is withholding the remaining $3.5 billion of the bail-out funds it offered back in 2008. At that time, the rupee was tumbling and Pakistan’s foreign-exchange reserves barely covered three weeks’ worth of imports. If the country is not yet in similar trouble, it can thank Pakistani folk abroad, whose remittances surged by 16.8% in the second half of 2010, compared with a year earlier (see chart). This is one reason why the rupee has not sunk further, and why the central bank’s reserves still cover six months’ worth of imports.
Yet foreign investment has slowed to a trickle, and higher commodity prices will add to the country’s import bill. Meanwhile, Pakistan’s foreign debt must be serviced. The finance minister is in a pickle. If Pakistanis lose heart, too, they may quit the currency, scrambling for dollars instead. Should that happen, Pakistan’s reserves will quickly vanish. And here is the big difference between 2008 and today: Pakistan has already had its IMF rescue.
In 2008, the PPP government pushed the procurement price of wheat up from Rs. 625 per 40 kg to Rs. 950 per 40 kg. This action immediately triggered inflationary pressures that have continued to persist as food accounts for just over 40% of Pakistan's consumer price index. According to State Bank of Pakistan (SBP) analysis, cumulative price of wheat surged by 120 per cent since 2008, far higher than the 40 per cent between 2003 and 2007. it is also many times greater than the international market price increase of 22 per cent for wheat in the same period. Similarly, sugar prices have surged 184 per cent higher since 2008, compared with 46 per cent increase during 2003-07.
ReplyDeleteThe transfer of additional Rs. 300 billion to Pakistan's agriculture sector during the current fiscal year 2010-2011 by higher prices of agriculture produce and direct flood compensation to 1.6 million affected families at the rate of one hundred thousands rupees each will boost economic confidence in the countryside. It will generate rural demand for consumer items including consumer durables such as fans, TVs, motorcycles, cars, refrigerators, etc.
Already, the upside of the government policy is that Pakistan's rural economy is being spurred by high crop prices that may help the GDP growth this year and next. Increased farm incomes are whetting the rural households' appetite for industrial and consumer goods in 2011 and beyond.
While it is good to see Pakistan's rural farm economy perk up, it is also important to recognize that the overall national economic outlook can not improve significantly unless the growing budget deficits and rising inflation are brought under control. And this will require the ruling feudal elite to pitch in by paying their fair share of income tax on their rising farm incomes. It is time for them to lead by example.
Here are some interesting excepts from a piece on Pakistan by Nancy Birdsall of Center for Global Development:
ReplyDelete------------U.S. policymakers should note well this series of events and remember a simple lesson. Billions of dollars of U.S. assistance-and a sustained diplomatic focus on the reform agenda-have not given the United States the ability to dictate the outcomes of Pakistan's political process. This is inconvenient for the United States, but not surprising. For the United States and for other major donors in Pakistan, money has never brought leverage.
Pakistan's energy sector demonstrates the difficulty in achieving the kind of influence donor countries would like to have. For decades, the World Bank and the Asian Development Bank-armed with sums greater than the current Kerry-Lugar-Berman U.S. aid package-have urged the Government of Pakistan to finally reduce the price subsidies on electricity, to no avail. Time and again, project documents cite the same problems, the donors recommend the same solutions, the government of Pakistan promises to implement the same reform, the government breaks (and donors lament) the same promises. Meanwhile, the basic politics maintaining the status quo have not changed-there are too many reaping the benefits of subsidized power, and ordinary consumers feel they aren't getting service that warrants paying more.
When Vice President Biden visited Islamabad this week, he promised that the United States would "keep the entire commitment" of the pledged $7.5 billion in Kerry-Lugar assistance. This assurance will surely be welcomed by Pakistan, and it's a fair reflection of Pakistan's short-term and long-term importance to U.S. interests. Adjusting where and how aid is spent-including by taking the requests of the Pakistani government into account-is necessary to respond to the real needs on the ground. (On that note, we applaud the decision to put $190 million into direct smartcard grants to help Pakistani flood victims rebuild their lives). But U.S. policymakers should not expect the aid money to give the United States greater influence on economic reforms in Islamabad. This is not the point, nor the potential, of U.S. aid.
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The key point is that certain aid projects can carry both direct benefits (better services and infrastructure for the people of Pakistan) and indirect benefits (incentives for the Pakistani political system to achieve greater results with their existing resources). Here are a few examples to consider: U.S. investments in energy generation and transmission capacity can be linked to public commitments to raise electricity tariffs only when brownouts have been reduced below an announced benchmark. In this grand bargain, as service quality improves, tariffs would go up, and another round of aid investments would be delivered. In another case, U.S.-financed tools can be deployed to help Pakistani citizens hold their government accountable-with regular reports on simple indicators of development, for example, or an easily accessible database of all development projects funded from internal or external resources. Or a pilot Cash on Delivery aid contract in one or more Pakistani provinces could put levers in the hands of education reformers and help their ideas gain traction.
Here's a Dawn-AFP story about a modest job recovery in Pakistan's textile sector with rising exports:
ReplyDeleteKARACHI: After a year of unemployment and wondering if his family would be better off if he died, Pakistani textile worker Murad Ali has got the spring back in his step.
One of thousands laid off by textile bosses last year, the father of four is now back at work and one of those to benefit from a surge in Pakistani exports in the current fiscal year, which ends on June 30.
Experts say rising global commodity prices, a government decision to prioritise power supply to industry and currency devaluation that has made Pakistani products more competitive, have fired an export boom.
Compared with the same period last year, the Trade Development Authority of Pakistan says textile exports such as silk rose 25.8 per cent and agricultural produce, such as basmati, rose 6.2 per cent from July to February 7, 2011.
The textiles sector is one of the key drivers of the Pakistani economy, accounting for 55 per cent of all exports and 38 per cent of the workforce, according to official figures.
Bosses have rehired staff who were laid off, but Ali is only getting a third of the salary as a skilled garment worker that he used to command.
“I’m earning less than last year. It is difficult to live a better life due to price rises, but I’m happy,” Ali said.
He has re-enrolled his sons at school but his wife will continue to work as a maid. Money is too tight for her to go back to being a housewife.
“The situation has drastically changed in the favour of the country’s economy,” said textile tycoon Mirza Ikhtiar Baig, who employs more than 2,000 workers and predicts exports will rise 10 per cent for the fiscal year 2010 to 2011.
“Now with demand for Pakistani products rising internationally we are employing more workers.
“Our exports are getting healthier because of an increase in international commodity prices and the government’s will to give top priority to the country’s economy,” said Baig, an advisor to Prime Minister Yousuf Raza Gilani.
The Asian Development Bank forecasts GDP growth for Pakistan of 2.5 per cent for fiscal year 2011 despite pressures from unprecedented floods in 2010, with a relatively modest rebound to 3.7 per cent for fiscal year 2012.
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Pakistan suffers from a profound electricity crisis that restricts production to around 80 per cent of its needs — a situation that will only worsen as the temperatures crawl higher in the coming months.
The budget deficit has grown to 5.5 per cent of GDP, above a 4.9 per cent target for the current fiscal year to June 30.
To fund the shortfall, the government borrowed $4.4 billion from the central bank from July 1 to February 28, a move that worsened inflation, rather than raise taxes and cut spending as the IMF and World Bank would like.
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Mohammad Sohail, head of the Karachi-based Topline Securities research and brokerage house, said the export boom would contribute to economic recovery, yet warned the gains were minimal.
“It is very fragile because the fiscal deficit is much higher than the target of 5.3 per cent because of the government’s heavy borrowing from the central bank,” he said.
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“Furthermore, the overall security situation in Pakistan is very uncertain, which is making the foreigners and local investors wary all the time.” Independent economist A.B. Shahid said rising international oil prices had hit the country’s economy hard, adding $4 billion to the oil bill.
Pakistan could have benefited more from 8-9 per cent export growth, he said, by exporting cloth in its value-added forms rather than raw cotton and yarn.
While Ali is content with life, he is also wary of uncertainties ahead.
“Life has become too insecure. Everyone is ill at ease. Let’s just wait and see.” – AFP
Pakistan's July 2010-March 2011 current account surplus at $99 mln, according to Reuters:
ReplyDeletePakistan's current account surplus for July-March period was a provisional $99 million, compared with a deficit of $3.106 billion in the same period last year, the central bank said on Monday.
In March, the current account was a provisional surplus of $347 million, compared with a deficit of $2 million in February.
The current account deficit for the fiscal year 2009/10 was $3.946 billion, compared with $9.261 billion in fiscal year 2008/09.
South Korea's LOTTE is planning to invest $500m in Pakistan, according to The News:
ReplyDeleteKARACHI: Lotte, the parent company of Lotte Pakistan PTA Limited, has hinted at expanding its operations in Pakistan, besides entering into other businesses such as confectioneries and constructions, officials said on Tuesday.
“If government of Pakistan offers us some concessions in taxation then we are keen to expend operations of Lotte Pakistan with a fresh investment of $500 million,” said Jung Neon Kim, Executive Director of Lotte Pakistan.
The PTA plant was acquired by Lotte in September 2009 and renamed as Lotte PTA Pakistan Limited.
Kim said Lotte is also in the process of acquiring Kolson. Therefore, it is about to enter the confectionary and food businesses in the country, as well.
The parent company also wanted to concentrate on the beverage industry, as well as expand into the chemicals and construction sectors, he said.
To attract more foreign investment and foreigners to the country, he said, Lotte wanted to develop and build residential projects exclusively for foreigners where they could live and enjoy sports and cultural facilities along with full security.
“Pakistan is a big market and the government could help encourage foreign investment if it supports persistency in tariff rates and offers lower taxes and tax breaks.”
He said that his company was the tenth largest taxpayer in Pakistan, contributing around Rs20 billion to the national exchequer in the form of taxes.
In his opinion, the tax rates in Pakistan were among the highest in the region and should be reduced to attract more investment.
Lotte Pakistan took CSR (Corporate Social Responsibility) very seriously and spent Rs400 million on CSR activities last year, besides contributing to the relief efforts for flood victims. He said Lotte is intensely involved in education and around Port Qasim where Lotte Pakistan PTA plant is located. Lotte, he said, is committed to spending Rs60 million annually on education in the area.
Pakistan bond offering withdrawn, says Dr. Ashfaque H. Khan:
ReplyDeleteYet another debacle has occurred on the economic front, with the government failing to float its exchangeable bond in the international debt-capital market. In an act of desperation, the Pakistani economic manager had decided to launch a $500-million exchangeable bond with 10 percent shares of Oil and Gas Development Corporation (OGDC) attached to this transaction, the proceeds of which were to come by the end of the current fiscal year. It was the intention of the government to use these proceeds for retiring its State Bank debt and reducing its budget deficit to that extent.
The Pakistani team was informed by the global investors during the road show that they had little appetite for Pakistani paper at the moment, particularly in the presence of the Greek debt crisis and the unresolved issue of increase in the debt limit of the US administration. The Pakistani team did not pitch for the bond and returned empty-handed.
Why did Pakistan have to abandon its transaction? Are the economic managers aware of the consequences of such a colossal failure for the country? One thing is clear from the perspective of the economic managers: who cares about the country? They are there to improve their resumes.
What is an exchangeable bond? The country issues a normal sovereign bond with an option that the bondholder can convert the bond into common shares. The transaction under discussion provided an option to bondholders to convert their bonds into OGDC shares. The advantageous thing about such a bond is that it has the option for conversion of debt into portfolio investment.
There are many reasons for the failure of this transaction. Firstly, the timing for floating the bond was highly inappropriate. This is summertime, when investors close their books and go for vacations. Secondly, the international economic environment, particularly the persistence of the Greek debt crisis and the emergence of issue pertaining to enhancing the debt limit of the US administration have created severe uncertainty in the international debt-capital market.
Thirdly, Pakistan’s own economic fundamentals are weak. Why would anyone invest in a country’s paper whose debt is rising, budget deficit is averaging over six percent of the GDP, high double-digit inflation continuous persists for the last 45 months, and growth is slowing to an average of 2.6 percent per annum over the last four years. Fourthly, Pakistan’s relations with the IMF and other development financial institutions (DFIs) are not smooth. Fifthly, Pakistan’s relations with the United States are also on a bumpy ride. For an emerging market country, its relationships with the US, the IMF and the DFIs are critical in attracting global investors to invest in its paper.
Sixthly, Pakistan’s domestic political and security environment are not conducive to attract global investors to invest in Pakistani paper. Seventhly, the Pakistani team involved in this transaction, barring one member, was quite immature and had no idea whatsoever about the transaction. All these factors have contributed to the failure of the transaction, damaging the reputation of the country and OGDC. In order to save face, the economic team could call this transaction “non-deal road show.” But the international capital market participants are not novices. Word has already travelled across the globe that Pakistan has failed to find takers for its paper.
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It is in this perspective that Pakistan floated its paper from February 2004 to May 2007. Each time the Pakistani paper was oversubscribed substantially. Pakistan emerged as one of the few countries which successfully floated a 30-year bond. This simply reflected the confidence of global investors in Pakistan’s economic management....
http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=54874&Cat=9
Here's The Express Tribune story on Pakistan's decision to cancel $500m bond offering:
ReplyDeleteTwo (Pakistan) government teams, which went to London, Singapore and Bangkok for holding road shows, have come back. They did not pitch the bonds at investors, instead restricted the presentations to the state of Pakistan’s economy, said one of the officials who travelled abroad for the road shows.
Another official, who also took part in the road shows, said foreign investors told the visiting teams that capital markets were nervous at this time because of a couple of international developments. They proposed that Pakistan should wait until the Greece debt crisis and issue of increase in debt limit for the Obama administration are resolved.
“In an effort to keep the budget deficit at manageable levels, the government wants to float $500 million worth of bonds before June-end,” said a spokesman for the finance ministry. Economists and a parliamentary panel have advised against the transaction, arguing that long-term assets cannot be consumed to settle short-term liabilities.
Sources in the Privatisation Commission told The Express Tribune that the government suddenly decided to convert the road shows into a ‘no-deal’ event, where it would not disclose the size of the bonds and the indicative interest rate it wants to pay.
Despite questions put up by international investors, the teams did not disclose details of the bonds. A Privatisation Commission official said the investors were keen to know the coupon price but the officials remained tight-lipped.
The Cabinet Committee on Privatisation has approved the term-sheet of the exchangeable bonds with an indicative mark-up ceiling ranging between 6.5 and 8.5 per cent.
Sources said international investors expressed interest in the bonds, as they were keen to invest in the energy company. However, some of them raised questions about Pakistan’s relationship with the International Monetary Fund (IMF). The Fund has suspended the $11.3 billion bailout programme since May 2010 after the government failed to meet some conditions.
IMF and European Union approved a 110-billion-euro bailout package for Greece last year but have withheld payment of a tranche of 12 billion euros that will help Athens pay its debts coming due by September. The international lenders have asked Greece to first place deep cuts on spending, prompting riots across the country. The Greek parliament on Tuesday voted for reforms but still IMF has not disbursed the tranche.
On the other hand, the United States too is coping with a crisis to avoid defaults on payments as the Obama administration reached its borrowing limit of $14.3 trillion on May 16. The administration sought an increase in the debt limit to avoid default that was overwhelmingly rejected by the House on May 31, reported the ....
Here's an interesting Op Ed by Kamal Monnoo, a Pakistani industrialist, as published in The Nation:
ReplyDeleteAgreed, that some of the macro-indicators in Pakistan are showing healthy trends or resilience, exports are up, current account deficit is down, remittances are climbing, reserves are stable and the Pak Rupee is holding out, but gauging from the manufacturing and productivity figures over the last two quarters could Pakistan’s economy be finally sliding into a serious recession? Riding on the back of some positive figures, the economic managers have thus far not only been blowing their own trumpet of success, but also literally ignoring and mocking their critics, who have tried to draw their attention to the missed opportunities and rather weak economic scaffolding that can simply crumble one day without warning like a house of cards!
Based on industrial production and productivity (especially in the small and medium enterprise sector) Pakistan’s economy contracted by nearly 4 percent - much more than expected - for at least two quarters running now, which basically means that technically we have already entered recession. Going by this, the big question actually should be that does the country have the political and economic will to fight its way out? The data underlines how the worst natural disaster (floods) to hit Pakistan in decades has foiled all hope of recovery and how the government’s addiction to borrow and the absence of visionary economic policies have contributed to the decline leaving the country in a vicious trap of high debt and a low growth amidst a rapidly rising population.
The global scenario is not helping either. Serious downturns both in the United States (where the predictions of recovery continue to be proven wrong) and the Western European economies, the two main markets for Pakistani goods, mean that the coming months for Pakistani exporters will be even tougher. All political endeavours on ‘trade not aid’ and preferential ‘market access’ in lieu of our help in the war on terror have also not been fruitful so far. What this basically tells us is that to avoid sinking we need to look inwards and start taking our own measures to embark on a path of economic recovery before the recession turns into an economic quicksand. Time and again, I have pointed out to the examples of China, India and Bangladesh, who have consciously maintained focus on manufacturing at home as their ticket to sustained economic activity and job creation. To help keep their engine of the industry running all related state and private sector institutions, banking/financial, power and energy, human resource, commerce and trade, have played their due role.
http://nation.com.pk/pakistan-news-newspaper-daily-english-online/Opinions/Columns/29-Jun-2011/Is-economy-entering-recession
Here's a News International report on impact of US downgrade on Pakistan:
ReplyDeleteThe ongoing economic crisis across the world after downgrade of the United States credit rating would have a positive impact on Pakistan’s economy as analysts said that the current account balance would stay in surplus and the electricity subsidy will automatically be contained.
The United States credit rating downgrade after enhancement of debt ceiling rattled the stock markets around the globe and majority of the equity markets have touched their lower locks. While major commodities, except gold, have also witnessed sharp decline in their prices after 2008.
“With the decline in oil prices globally, Pakistan’s current account balance is likely to stay in surplus and the electricity subsidy will automatically be contained,” according to a JS research report on Tuesday.
The report said that the growth is expected to rebound due to the bumper agriculture crops and inflation would tame further, whereas equity market will remain resilient compared to its regional peers due to lower foreign exposure.
“However, political instability and deteriorating law and order situation are the key risks to the economy,” it added.
Analysts said that the present global crisis is different to 2008. The crisis of 2007/08 was driven by excessive overheating of the global economy and resultantly commodity and real estate markets touched their peak levels.
In that crisis, Pakistan suffered as a result of higher global commodity prices and the government flawed domestic prices of providing huge subsidy.
“As a result, the twin deficits hit 16.3 percent of the GDP,” the JS report revealed, adding that this difficult scenario led to the International Monetary Fund (IMF) programme in order to bailout the economy from the brink of collapse.
However, the report said that in 2011/12 crisis Pakistan’s macros will be resilient and will benefit from the decline in the global commodity prices.
“Unlike 2008, Pakistan’s real interest rates are positive, real effective exchange rate is not overvalued and subsidies are largely contained,” it added.
About the United States austerity plan and its impact on Pakistan, experts believed that the United States is unlikely to reduce its spending towards the war on terror.
The American economy is going through its worst period in history, where Obama’s administration is left with very little fiscal space to finance its ballooning fiscal deficit that is around nine percent of the GDP.
The stimulus package of post-Lehman crisis has left the Federal Reserve Bank of America literally with no option either. To smooth the functions of the US Treasury, the lawmakers have agreed to provide additional $2.4 trillion to the debt ceiling, subject to deficit saving of approximately $1 trillion over the next decade.
This year the Americans are unlikely to reduce their spending as the austerity measures decided will be implemented from 2013 onwards, experts said.
The JS report said that the United States will continue to pay for counterinsurgency programme in Afghanistan even if it plans to pullout from Afghanistan by 2014.
On Pakistan’s front, the United States will definitely play the role of the devil’s advocate and delay the due payments or reduce the grant size, according to the report.
Overall, the presence of the United States in Afghanistan will keep the dollar flows continued into Pakistan directly or indirectly, the report said, adding that the United States rationalisation of budgets will have a bare minimum impact on Afghanistan and Pakistan.
http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=61883&Cat=3
There are a lot of different figures and forecasts floating around different websites and publications that significantly overstate India's GDP and understate Pakistan's.
ReplyDeleteThe figures I have posted in my recent blog posts were released in May 2011 by India and in July 2011 by Pakistan. This is the only apples-to-apples comparison that is valid. The rest is irrelevant.
Economic Survey of Pakistan 2010-11 puts the nation's population at 177 million and nominal gdp at $222 billion or $1254 per person.
And Economic Survey of India 2010-2011 says India's population is 1.2 billion and puts nominal GDP at $1.46 trillion or $1218 per person.
http://articles.economictimes.indiatimes.com/2011-05-31/news/29604458_1_capita-income-national-income-economy-at-current-prices
http://www.infopak.gov.pk/EconomicSurvey/Highlights.pdf
Here's the latest IMF assessment of Pak economy, as reported by The News:
ReplyDeleteISLAMABAD: The International Monetary Fund (IMF) on Saturday said that Pakistan’s economy is braving serious challenges of an energy crisis and fast dwindling investment that is why it needs to ramp up efforts to carve out a long-term recipe to stimulate growth and reduce rising unemployment.
Pakistan’s economy is exposed to the worst effects of the floods and appalling security. The government has though undertaken many economic reforms, yet there are many serious challenges of energy crisis and dwindling investment.
Adnan Mazarei, Assistant Director of IMF for Middle East and Central Asia, after a seminar on “Revival of Pakistan Economy” stated this during a press briefing here on Saturday.
Mazarei expressed his dissatisfaction over the government’s performance in the energy sector and asked it to restructure the power sector to make it turn around. “The broadening of the tax base is also one of the biggest challenges the Pakistan economy is braving as the political consequences also negatively impact on the economy and people avoid paying taxes because they wanted an honest government and some dividends in return.”
He said that fiscal imbalances are also needed to be addressed. “Pakistan needs inclusive growth and employment generation as well as better distribution of resources and lowering of poverty rate to ensure equitable benefit to the people.”
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Finance Minister Dr Abdul Hafeez Sheikh said that role of the government representative during the day-long seminar was to listen to the economists, business community and development partners and share with them the steps taken for the economic reforms in the country. He said the economic team held very constructive discussion with the IMF during Article IV discussion in Dubai on economic reforms and about way forward policy mix to move on to high growth path.
Hafeez Sheikh said that first four months of the current fiscal year were very positive with exports going over 6 billion dollar which were 23% more than the same period of previous year and remittances 4.2 billion dollars, 23% up by the same period of last year. The minister said the growth in taxes during the first four months was 28% with total collection of Rs509 billion compared to the same period of last year.
http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=10412&Cat=13
Here's an excerpt from an Op Ed by Dr. Ashfaque Khan published in The News:
ReplyDeleteReviving the economy will require addressing both near and medium-to-long term economic challenges. The solution to these challenges boils down to restoring macroeconomic stability on the one hand and promoting economic growth through growth critical reforms on the other.
Let me share my thoughts on these economic challenges. For addressing near term economic challenges, the commitment to fiscal discipline is a pre-requisite. A sound fiscal position is essential to achieving macroeconomic stability, which is increasingly recognised as a critical ingredient for promoting strong and sustained economic growth and lasting poverty reduction. An adequate level of revenue generation is sine qua non for the public policy to fulfil growing expenditure requirements.
The thrust of revenue mobilisation must include reducing tax rates, broadening the tax base, shifting the incidence of taxes from imports and investments to consumption and incomes, and providing a congenial environment to increase tax compliance. Every sector of the economy must be brought under the tax net. An equitable taxation system demands that income originating from any sector, if it crosses the threshold level, must be taxed.
Potential areas which can be brought under the direct tax net include agricultural income, incomes of doctors, lawyers, beauty parlours, chartered accountants, wholesalers and retailers and transporters to name a few. Improving withholding tax regime would increase the government’s tax revenue immensely. Taxes are being collected by withholding tax agents but are not being deposited in the government’s treasury. I am glad that the FBR has taken note of this and is making efforts to address this issue.
On the expenditure side, the government will have to take a bold decision as to the future of the rotten PSEs. In particular, how long can the government bail out these bleeding institutions from taxpayer money? The time has come to offload some of them even at a rupee each and appoint the best team available to manage the others. The government can save at least over Rs300 billion which can be spent on millions of defenceless poor and improving the country’s physical and human infrastructure.
Inept handling of the power sector has resulted in the accumulation of unsustainable circular debt. By raising the power tariff alone, the government has caused circular debt to balloon. Raising the power tariff is tantamount to raising tax rates. It is common knowledge that if we keep on increasing tax rates people will avoid paying taxes. Similarly if we keep on raising power tariffs it will encourage people to use unfair means to avoid paying electricity bills. As long as there are line losses and power theft, the issue of circular debt will always be there.
The government will have to reduce fiscal deficit from 6.5 percent of GDP last year (2010-11) to three percent by 2013-14. This can be achieved, provided there is commitment to fiscal discipline. Reduction in fiscal deficit will reduce the government’s borrowing requirements which in turn will help the SBP to reduce interest rate thereby freeing more credit for the private sector. This would also help the government to lessen its borrowing from the SBP and to moderate inflation.
Restoring fiscal discipline would help maintain price stability provided the government maintains moderation in enhancing government administered prices such as support price of wheat, and power and gas tariffs. Mobilising more resources through taxation on POL products would not help in reducing inflation. Thus, reducing budget deficit, moderation in government administered prices and maintaining exchange rate stability would be critical to bringing inflation down to a single-digit...
http://www.thenews.com.pk/TodaysPrintDetail.aspx?ID=78636&Cat=9
Here's an Express Tribune story on a discussion at Inst of Business Admin in Karachi, Pakistan:
ReplyDeleteA vigorous difference of opinion among technocrats, economists and corporate leaders on a number of socio-economic issues was witnessed during an interactive session held at the Institute of Business Administration (IBA) on Saturday. And at the end it was unclear whether democracy was the answer, or a dictatorship, as advocates for both arguments came up with pretty convincing logic.
Speaking at the session organised by IBA in collaboration with Blinck, a youth resource group, under the title of “New Year Resolutions for the Economy of Pakistan,” panellists candidly expressed disagreements over the questions of foreign aid, democracy and the interplay of policy-making and implementation at the national level.
“Many people think that a non-democratic set-up is a panacea for the economic problems of Pakistan. They’re wrong. A non-democratic government is not sustainable,” said Ishrat Husain, former governor of the State Bank of Pakistan, who is currently serving as dean and director of IBA. “Democracy is slow and messy. It takes two steps forward and four steps backwards. Yet it’s the only option. The democratic process shouldn’t be interrupted.”
Husain said military regimes do make an extra effort in the beginning to improve the economy because they have not yet developed a constituency of their own. “But later on, they start making compromises.”
Claiming that a democracy needs low poverty and high literacy rates to prosper, Gillette Pakistan CEO Saad Amanullah Khan said Pakistan had only two eras of development: first, in the early 1960s, and second, during the first three years of the Musharraf government. “I don’t care if a dictator is there as long as he revamps the economy,” Khan said.
He said that the idea of a government led by technocrats that could bring the economy back on its feet had its relative merits. Khan emphasised the need for adopting a national vision for long-term growth, adding that the entire nation should work towards its realisation. “Go to Proctor & Gamble or Gillette, and they’ll tell you their five-year goals in detail. But ask a government representative what the vision for Pakistan is for the next five years, you won’t get any definite answer.”
Disagreeing with Khan, Husain said Pakistan did not need any more “visions,” as the problem existed in their implementation only. “The country is full of pious documents. These are beautifully written policy papers that nobody reads. We all agree on the substance of policy, but the implementation is the real issue.”
Responding to a question, former Asia editor for The Economist Simon Long said it was wrong to attribute Pakistan’s dismal economic performance of six decades to its culture or laid-back attitude to work. He said that 35 years ago people often assumed China’s poor economy was a consequence of Confucianism. He said it was now obvious that Confucianism had nothing to do with the slow growth in the economy of China.
Talking about Pakistan’s economic indicators, Long said an economy with a tax-to-GDP ratio of less than 9% was not sustainable. He said it was hard for him to understand how Pakistan’s economic managers would bring down the fiscal deficit in next two to three years.
In response to the comment of a business student that Pakistan should stay away from all kinds of foreign aid and assistance to achieve self-reliance, Husain said the assumption that the Pakistani economy depended on US aid to survive was wrong. “Isolationism won’t solve our problems. Transfer of knowledge and technology is important. You’ve to be outward-oriented.”
http://tribune.com.pk/story/301827/failed-rescue-act-too-many-visions-for-pakistan/
Here's a Reuters report on increase in Pak forex reserves:
ReplyDeletePakistan’s foreign exchange reserves rose to $16.85 billion in the week ending Dec. 30, compared with $16.77 billion the previous week, the central bank said on Thursday.
Reserves held by the State Bank of Pakistan (SBP) were flat at $12.81 billion, unchanged from the previous week, while those held by commercial banks rose to $4.04 billion, compared with $3.96 billion the previous week.
Foreign exchange reserves hit a record $18.31 billion in the week ending July 30, but have since eased due to debt repayments.
Reserves were boosted in June last year by inflows of $411 million, including a $191.9 million loan from the World Bank, and a $196.8 million loan from the Asian Development Bank.
Higher export proceeds and a record inflow of remittances have also helped support Pakistan’s foreign exchange reserves.
According to official data, remittances rose 18.33 per cent to $5.24 billion in the first five months of the fiscal year (July-June), compared with $4.43 billion in the same period a year earlier.
However, they fell slightly to $923 million in November, compared with $926.89 million received in November last year.
Islamabad has to start repaying an $8 billion International Monetary Fund loan in early 2012. Without additional sources of revenue, that will put further pressure on Pakistan’s foreign exchange reserves.
http://www.dawn.com/2012/01/05/pakistani-forex-reserves-rise-to-16-85-billion.html
Here's a report on Fortune magazine's interview with Pakistan's former leader Shaukat Aziz Part II:
ReplyDeleteYou mentioned the need for good management. How would you assess the current management of the economy? I ask that in light of the lapsing of the stabilization plan with the IMF.
Being out of the IMF -- obviously this reflects the desire of the government to have more flexibility to pursue its reforms. The IMF program does bring with it certain macroeconomic discipline and that's beneficial, but I also believe in economic sovereignty. You need good governance and good management, but abdicating the economy to the IMF is not the way to succeed. What we need is growth and job creation, like every other country in the world.
The disagreement with the IMF is at least in part related to tax collection, which has been notoriously weak in Pakistan. There is a lot of concern whether Pakistan can muster the political will to make tough reforms, partly because of self-serving elites among the political class that have brought the country to the point of being nearly a failed state.
No, I think that's not true. The country is large -- roughly 180 million people -- and it's functioning. It has many challenges -- governance issues, transparency and management issues -- on top of the security issues that have cost us dearly. But the country is functioning. Obviously it could function better, but it's not come to a grinding halt. Life is going on.
Don't expect an Iranian oil crisis
Clearly, the country is facing a challenging situation financially, and tax reform has been an issue. It's true there is low tax compliance, but you have to look at the political impact -- not just the economic impact -- of taxes. The tax system has been around for a long time. Trade-offs have to be made; indirect taxes -- sales tax and customs duties -- have grown because of that, quite handsomely. Income tax is also up, but that is mostly out of big corporations' profits.
The key question is: How do we get growth? The pie has to get bigger for you to collect more taxes. You can't squeeze the lemon if there's no juice in it.
Moving on to Afghanistan, the U.S. is being more realistic about its transformative agenda and the Obama administration seems to be determined to wind things down. How do you see this playing out?
I think this is the right way to go. The presence of foreign troops generates ill effects and the sooner they are gone, the better. But the exit strategy has to be very carefully choreographed.
We need a Marshall Plan-like approach, a massive program for reconstruction. The World Bank, the Asian Development Bank, the sovereign banks, and many individual countries, have to be involved. There was a very successful meeting recently of Turkey, Pakistan, Afghanistan and others in Istanbul. People need to see a future, that tomorrow will be better than yesterday. The people of Afghanistan will have to work hard themselves to leverage this opportunity. It's a good thing that the U.S. and the Taliban are talking -- all stakeholders have to be included. I'm cautiously optimistic that adversity can be changed into an opportunity if it is funded well.
U.S.-Pakistan relations are generally refracted through the prism of Afghanistan but also through the fact that Pakistan is a nuclear power.
I think certainly the relationship is opportunistic on both sides. But I think the U.S. is pursuing a policy of both engagement and containment of Pakistan at the same time. We are both a friend and an adversary. Therein lies the conflict in the relationship. There is a trust deficit and when it comes to the nuclear issue there is a fundamental problem.....
http://finance.fortune.cnn.com/2012/01/09/pakistan-shaukat-aziz/?section=magazines_fortune
Here are excerpts from a Dawn report on World Bank's assessment of Pakistan's economy:
ReplyDelete...Pakistan is South Asia’s second largest economy, representing about 15 per cent of regional GDP.
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The portion on Pakistan points out that the country’s economy firmed in the second half of 2011. Industrial production surged to grow at a robust 32.1pc annualised pace during the three months ending in October, after falling at 9.1 and 10.1pc rates during the first and second quarters, respectively.
Part of the strengthening in growth reflects base effects due to the widespread flooding that had hampered activity in the second half of 2010. Since the floods occurred in July and August 2010, GDP growth on a fiscal year basis (ending June-2011) slowed to 2.4pc.
The report notes that Pakistan’s weak growth outturns are also tied to “worsening security conditions, accompanied by greater political uncertainty and a breakdown in policy implementation”.
The report also notes that “infrastructure bottlenecks, including disruptions in power delivery,” remain widespread.
A notable bright spot has been a strengthening of exports, evident particularly in the first half of 2011, led by textiles that surged 39pc in the first half of the year.However, like India, Pakistan’s export volume growth saw a sharp fall-off in October.
Indeed, Pakistan’s export volumes fell to a minus 46pc rate in the three-months ending October.
Along with an upswing in worker remittances inflows, robust exports have supported Pakistan’s external positions and contributed to an improvement in the current account from a deficit of 0.9pc of GDP in 2010 to a surplus of close to 0.5pc of GDP in the 2011 calendar year.
The World Bank notes that monetary tightening in Pakistan brought about positive real lending rates in early 2011 as well, the first time since late 2009.
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The bank points out that for South Asian nations, including India and Pakistan, domestic crop conditions and price controls are more important determinants of domestic food price inflation.
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Regional monetary policy authorities face several challenges in reducing inflation.
More recently, currency devaluation has contributed to inflation as well. In Pakistan, monetary authorities have also been monetising the deficit, complicating the efficacy of other monetary policy efforts to reduce inflation.
A key factor working against monetary policy efforts is the overall stance of fiscal policy, which despite some consolidation, remains very loose.
Monetary authorities in Pakistan have responded to persistent price pressures by raising policy interest rates and/or introducing higher reserve requirements.
Lower revenue growth has contributed to larger fiscal deficits in Pakistan. Terms of trade losses are estimated at about 1.9pc of GDP for the region in aggregate. India and Pakistan saw negative impacts of close to 1.8pc of GDP – estimated January through September 2011 terms of trade impacts relative to 2010.
Remittance inflow to Pakistan rose by an estimated 25pc in 2011, partly in response to the widespread flooding in the second half of 2010.
International reserve positions in South Asia have generally improved since mid-2008. Latest readings of foreign currency holdings were equivalent to at least three-months of merchandise imports in Pakistan.
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A good crop year (2011-12) in much of South Asia and sustained high regional stocks are providing a buffer for grain prices and import demand in 2012....
http://www.dawn.com/2012/01/19/pakistans-economy-recovering-wb.html
http://siteresources.worldbank.org/INTPROSPECTS/Resources/334934-1322593305595/8287139-1326374900917/GEP_January_2012a_FullReport_FINAL.pdf
Here's a Dawn report on ADB's assessment of Pakistan economy:
ReplyDelete...After devastating summer floods caused economic growth to slow to 2.4 per cent in the 2010/11 fiscal year, ADB country director for Pakistan Werner Liepach forecast growth to pick up to just 3.6 per cent in 2011/12. The government targets an expansion of 4.2 per cent.
“Short-term there are huge challenges… (the) next few months will continue to be protracted as there are repayments and not enough inflows, reserves will go down,” Liepach said.
“But I don’t see a crash coming, and I don’t see the economy taking off either and that’s not good enough.”
There is grave concern amongst analysts about a possible balance of payments crisis as Pakistan’s current account deficit has widened to $2.154 billion in the first six months of the 2011/12 fiscal year.
Pakistan had a surplus of $8 million in the same period last year.
The deficit is likely to widen further in the coming months because of debt repayments and a lack of external aid.
The country’s foreign exchange reserves stood at $16.90 billion in week ending Jan. 13, compared with its record of $18.31 billion in July last year.
The pressure on reserves is likely to continue especially as IMF repayments start from next month.
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Pakistan has to repay IMF about $1.1 billion by the end of 2011/12 fiscal year.
“Pakistan has huge potential and not all is negative or gloom and doom,” said Liepach. “I am positive in the long term if right decisions are taken today.”
Pakistan has been criticised over its slow implementation of fiscal reforms which include elimination of energy subsidies and restructuring of the state owned utilities.
The government also received criticism for not being committed towards implementing the necessary reforms to bring the economy back on track.
“The people who we are talking to in the government, technocrats, they are committed and want to see the benefits and improvements in Pakistan, they are very sincere in bringing a change in Pakistan,” said Liepach.
“But when you move away from the technocrat level, that’s when it becomes more complicated. It is a complex decision making system.”
Focus on projects and delivery of results
ADB’s focus and therefore assistance largely now revolves around projects with four core areas, energy, urban services, water infrastructure and irrigation, and transport.
“We want to fight poverty through growth and right now our business is focused on implementation of projects and to get results on ground,” said Liepach.
ADB does not require a letter of comfort from the IMF for approval or disbursement of project-based assistance.
ADB has an envelope of $2.9 billion for energy for Pakistan until 2016, out of which $1.4 billion has been utilised and $1.5 billion remains to be drawn down by the government.
Pakistan’s power sector faces a shortfall that often peaks at 5,000 megawatts per day.
For urban services, the board has approved $300 million, out of which $260 million remains, water infrastructure and irrigation $900 million has been approved with about $400 million left to be drawn down and $1.1 billion has been approved for transport, and $700 million is left.
Government can draw down the assistance when a project is approved and made effective.
“It’s a success when power reaches families and industries or when water becomes available to the families etc,” said Liepach.
http://www.dawn.com/2012/01/20/pakistan-growth-challenging-dependant-on-reform-pace-adb.html
Here's a Global Post story on NATO using smugglers to supply its troops in Afghanistan through Pakistan:
ReplyDeleteWith few other options available to it since Pakistan closed its border crossings almost two months ago, NATO has at times resorted to paying local smugglers to get much-needed supplies to its troops fighting in Afghanistan, Pakistani officials say.
The Pakistani and Afghan smugglers, who must pay bribes to militants to travel safely through some areas, navigate treacherous routes over the 1,800-mile mountainous divide that separates the two countries to bring containers of oil, food and other essential items — all at a price — to soldiers on the other side.
“Borders mean nothing to us. We have been crossing in and out for centuries,” Sahib Khan, a smuggler who said NATO had hired him, told GlobalPost.
The hiring of illegal smugglers came after a failed attempt by NATO to pay private companies, which truck goods across the border under the Pakistan-Afghanistan Free Trade Agreement (PATA). These private companies, Pakistani officials said, were secretly swapping out their normal cargo for NATO supplies until Pakistani security forces caught wind of the scam.
A senior officer for the Frontier Corps, an elite military unit that is responsible for security along the border, told GlobalPost that a total ban on the movement of containers under PATA, which was signed in 2010 to promote bilateral trade, eventually foiled the strategy.
“We had concrete evidence that some of the containers being imported by private companies, under PATA, were being used to smuggle supplies for NATO troops under cover of commercial imports,” the official said.
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Smuggling between Pakistan and Afghanistan has long been a profitable and vibrant business. Various trade agreements have been signed between the two neighbors in a bid to contain the practice, but high import and export taxes coupled with little government oversight, thwarted those attempts.
Mostly items like flour, edible oil, lentils, dried vegetables, contraband cigarettes, and animals for meat are smuggled into Afghanistan, while spare auto parts, electronics and unregistered vehicles are smuggled the other direction.
Smuggling is so widespread that it has become the backbone of the economy in towns and villages along the border, where locally it is treated simply as normal trade. The mountainous terrain provides an edge over security to smugglers who regularly trickle across the border without any trouble.
Sahib said that most of the food and oil supplies he has carried across the border for NATO originate from the southern port city of Karachi, and are moved through Peshawar and Quetta, and finally through Pakistan’s tribal areas, which are largely under the authority of various militant groups.
For those militants, the smugglers have been an important source of income. Smugglers are required to pay “rahdari,” or “passage,” an unofficial tax that allows them safe passage.
“Once we are onto the route, it’s the responsibility of those who receive rahdari to ensure we are able to safely enter into Afghanistan,” Sahib said.
Any smuggling that is done on behalf of NATO can in no way make up for the closed borders, however. Smugglers say they carry between 20 and 25 small containers a day while, when the border crossings were open, NATO shipped an average of 250 large containers a day — making the reopening of the borders essential to the war effort.
http://www.globalpost.com/dispatch/news/regions/asia-pacific/pakistan/120123/pakistan-border-nato-us-troops-afghanistan
Pak threat to Indian science
ReplyDeleteHindustan Times
Pakistan may soon join China in giving India serious competition in science. “Science is a lucrative profession in Pakistan. It has tripled the salaries of its scientists in the last few years.” says Prof C.N.R. Rao, Chairman of the Prime Minister’s Scientific Advisory Council.
In a presentation to the Prime Minister, Rao has asked for a separate salary mechanism for scientists. The present pay structure, he says, is such that “no young technical person worth his salt would want to work for the Government or public sector”.
He adds, “You needn’t give scientists private sector salaries, but you could make their lives better, by say, giving them a free house.”
Giving his own example, he says, “I have been getting a secretary’s salary for the last 35 years. But I have earned enough through various awards.
But I can raise a voice for those who aren’t getting their due.” Last year, Rao won the prestigious Dan David Award, from which he created a scholarship fund. So far, he has donated Rs 50 lakh for scholarship purposes.
The crisis gripping Indian science seems to be hydra-headed. “None of our institutes of higher learning are comparable with Harvard or Berkeley,” points out Rao. The IITs, he says, need to improve their performance: a faculty of 350 produces only about 50 PhD scholars a year. “That’s one PhD per 5-6 faculty members,” says the anguished Professor.
Rao fears that India’s contribution to world science would plummet to 1-1.5 per cent if we don’t act fast. At present, India’s contribution is less than three per cent. China’s is 12 per cent.
“We should not be at the bottom of the pile. When I started off in the field of scientific research at 17-and-a-half, I had thought that India would go on to become a top science country. But now, 55 years later, only a few individuals have made it to the top grade,” he laments.
http://www.hindustantimes.com/News-Feed/NM13/Pak-threat-to-Indian-science/Article1-124925.aspx
Here's a News report of losses at sta6e-owned Pakistan Steel Mills:
ReplyDeleteThe Federal Cabinet that met here on Wednesday with Prime Minister Yousaf Raza Gilani in the chair turned down the loss making Pakistan Steel Mills’ (PSM) request for Rs9 billion to bail it out of financial crisis.
PSM, a few days ago, had moved a summary to the federal cabinet through the Ministry of Production to seek a Rs9 billion bailout package from the government as it was in severe financial crisis; and the Mills was running below 20 percent of its capacity. The cabinet deferred the Mills request until the next meeting of the cabinet.
It is worth mentioning that PSM remained a profit-making entity for seven years, from 2000 to 2007, but as the PPP-led coalition government came into office, the entity started accumulating billions of rupees losses and continues to nosedive. The Mills is spending about Rs1.2 billion a month under different heads, whether it is making profit or raking up losses. The giant holds a constant burden of 21,000 employees despite suffering from low productivity.
The Ministry of Production is also now distancing itself from this politically sensitive entity and believes that the Mills is more in control of the Cabinet Committee on Restructuring of State-Owned Enterprises, headed by the Finance Minister Dr Hafeez Sheikh, well-placed sources told The News.
Interestingly, last year in November, the federal minister for production Chaudhry Anwar Ali Cheema also gave a blatant statement by calling the Mills “nothing but a burden on the economy of the country” and had advised the government that it is better to get rid of it rather than feeding it with billions of rupees every year.
Official sources, while giving a blue print of the Mills performance, said that during 2007-08, PSM production attainment stood at 82 percent of its capacity utilisation and after that, it took a declining course to 64 percent in 2008-09, 40 percent in 2009-10 and 35 percent in 2010-11.
This year too, due to shortage of raw material including iron ore and coal, the Mills is running on less than 20 percent of its capacity.
As far as the sale of PSM products is concerned, it was recorded at Rs42.938 billion in 2007-08 and has been on the decline since then, with Rs34.340 billion in 2008-09, Rs23.832 billion in 2009-10 and Rs27.379 billion in 2010-11.
The last time PSM had fetched Rs2.38 billion in profit was in 2007-08, while after that it continuously racked up losses. In 2008-09, its losses were 26.53 billion in 2009-10 it was Rs11.52 billion and in 2010-11 it was Rs11.49 billion.
According to PSM data, during the first quarter (July-September 2011-12) it accumulated losses of about Rs4.3 billion.
http://www.thenews.com.pk/Todays-News-3-102456-Pakistan-Steel-Mills-denied-Rs9bn-bailout-package
Here's a BR story on FDI plummeting in Pakistan:
ReplyDeleteAccording to the latest data released by the State Bank of Pakistan on 15th May, foreign private investment in the country dropped to only dollar 595 million in July-April, 2012 as compared to dollar 1.622 billion in the corresponding period last year, showing a huge fall of over 63 percent.
Out of this, foreign direct investment (FDI) fell to dollar 667 million as against dollar 1292.8 million in the comparable period of 2011-12, while portfolio investment showed an outflow of dollar 71 million in sharp contrast to an inflow of dollar 329 million in the corresponding period last year.
Sector-wise, the most discouraging news was in the telecommunication sector which used to be the favourite area of investment of foreigners but witnessed a profoundly high net outflow of dollar 327 million of investment during the first ten months of the current fiscal as against an inflow of dollar 73 million in July-April, 2011.
The power sector also recorded a net outflow of dollar 25 million compared to a net inflow of dollar 129 million in the same period of last year.
FDI in financial business declined to only dollar 54 million compared to dollar 223 million in the corresponding period of 2010-11.
Transport and trade sectors also witnessed massive declines of 83 percent and 55 percent, respectively, in FDI during the year.
However, investment in the oil and gas exploration sector at dollar 466 million witnessed an increase of 12 percent during July-April, 2012.
Country-wise, FDI from the US was the highest at dollar 196 million followed by the UK at dollar 171 million, Italy at dollar 162 million and China at dollar 113 million.
A steep fall in FDI during the first 10 months of 2011-12 is definitely disturbing news for the country, especially at a time when the economy is in dire need of liquidity to revive its growth prospects to create job opportunities and reduce poverty.
Also, foreign investment is crucial for technological upgradation, innovative improvements and overall modernisation of the industrial base to allow it to be competitive at the international level and enhance exports to narrow the widening trade gap.
Of course, the compulsion to attract FDI would have been less severe if the country was able to generate the required level of domestic resources to finance the needed investment, but obviously this is not the case as indicated by a huge gap in these two variables.
The most worrying aspect of the situation is that foreign investors have, over the years, changed their perception about the country as a favourable destination of investment and shifted their attention to other countries.
This is indicated by a steady decline in FDI in the country from dollar 5.4 billion in FY08 to dollar 3.7 billion in FY09, dollar 2.2 billion in FY10 and dollar 1.7 billion in FY11.
If the present trend continues which we have no reason to contest, the inflow of FDI during 2011-12 could be less than dollar one billion or highly inadequate to make any meaningful contribution to the country's economic prospects.
The reasons for a rapid decline in FDI in the recent years are not difficult to understand.
Although, there are ample opportunities for investment in various sectors of the economy and Pakistan has one of the most conducive policy framework to attract FDI, the inhibiting factors are so dominant and pervasive that foreign investors seem to avoid the country without giving much thought to the positive gestures of the government.
Some of the deterrents to foreign investment include poor infrastructure, energy crisis, very poor law and order situation, corruption, political instability, lack of good governance and increasing militancy......
http://www.brecorder.com/editorials/0/1190691:slump-in-foreign-investment/?date=2012-05-18
Here's an ET piece on history of economic growth under various leaders since 1947:
ReplyDeleteThe Express Tribune took the trouble to go through Pakistan’s historical GDP growth rates and compared various governments. We used GDP growth numbers from the Pakistan Bureau of Statistics records, which go all the way back to fiscal year 1952. We then calculated the geometric average (which calculates the compound average growth rate) rather than the simple arithmetic average to calculate the growth rates during the entire tenure of a government and then we ranked them. The results were somewhat surprising.
For instance, former President Ayub Khan – widely regarded as Pakistan’s best ruler when it comes to economic growth – is actually in second place. The number one spot is held by former President Ziaul Haq, who averaged 5.88% growth during his 11 years in office.
For fans of President Ayub who insist that his record before the 1965 war was better, we checked: it is not true. Pakistan’s growth rate during that period averaged 5.73% per year, which is actually lower than President Ayub’s own overall average of 5.82%. Having said that, industrial growth from the 1958 coup to the 1965 war averaged 9.21%, higher than any Pakistani ruler’s record, including Ayub’s own overall average of 8.51%.
Another surprising insight: if one ranks the ten rulers Pakistan has had since 1952 according to the average economic growth rate during their tenure, both the top five and the bottom five include three dictators and two democrats.
Yes, the top three slots are undoubtedly all taken up by the usual suspects: former Presidents Ziaul Haq, Ayub Khan and Pervez Musharraf, in that order. The next two are somewhat surprising: Benazir Bhutto comes in at fourth place and her father Zulfikar Ali Bhutto is not far behind. The supposedly pro-markets Nawaz Sharif comes in at seventh place.
Yet another surprise: Benazir Bhutto’s average was 5.08%, not far off from Pervez Musharraf’s 5.14%. She beat her rival Nawaz Sharif by a full percentage point: Pakistan’s economic growth averaged 4.06% during Nawaz Sharif’s both terms as prime minister.
Length of time in office appears to matter far more than whether the ruler was a dictator or a democrat. The top three were all in office for at least nine years, with the top two each in office for eleven years. Yahya Khan, Iskandar Mirza and Ghulam Muhammad – none of whom was democratically elected or subject to a popular mandate – all come in close to the bottom of the rankings. None of them had longer than four years in office.
But the more intriguing question to ask is why both the Bhuttos vastly outperform Nawaz Sharif.
The answer lies in the breakup of the GDP number: while Nawaz beat both Bhuttos on industrial growth, he was abysmal when it comes to agriculture. Benazir Bhutto was the best in Pakistani history for agriculture, which grew at an average of 6.65% during her five years in office.
Zulfikar Ali Bhutto, meanwhile, had blowout growth in services, averaging 10.63% during his only term in office, the highest of any Pakistani ruler. (Oddly enough, the elder Bhutto had a poor track record on agriculture, despite his family background. Agriculture grew at a paltry 2.12% per year during his tenure, worse even than Nawaz.)
For those who are currently pessimistic about Pakistan’s economic prospects, you may find some comfort in knowing that the numbers back you up: President Asif Ali Zardari ranks dead last in terms of economic growth, averaging a paltry 2.62% during his term in office so far.
http://tribune.com.pk/story/381450/setting-the-record-straight-not-all-dictators-equal-nor-all-democrats-incompetent/
Here are some excerpts of an interesting Op Ed in The Nation newspaper by former finance minister Shaukat Tarin:
ReplyDeleteDespite all the gloomy news and events that has started to define Pakistan, our national resilience remains intact. However, the question that is one every one’s mind is for how long?
Let’s start with the positives (yes there are always some!) of Present Day Pakistan;
• CP Inflation while high is showing signs of becoming range bound;
• Foreign Remittances continue to rise (the PRI scheme launched under my stewardship has borne fruit with remittances expected to cross the $l2b annual mark this year);
• We have finally started to debate/define our role in the devastating ‘War on Terror” and the end game of Afghan conflict has started to be played out.
• Pakistan’s banking system remains insulated from the Western banking meltdown.
• Booming Agrarian economy, despite devastating floods; with corporate sector moving into dairy, live-stock and value added processing.
• While most of the rest of the world is ageing our population is getting younger
• Democracy is still holding on!
However, we are far from the country we all aspire. The negative list (so to speak) is long, makes a somber reading, but largely includes:
• Lack of governance and transparency (lack of meritocracy).
• Unrelenting and crippling energy shortages.
• Lack of Scale/infrastructure to support GDP growth.
• Security and Law and order situation (Perception twice as worse as reality with the reality bad enough especially in Karachi and Quetta)
• Weak Social Sector reforms/indicators.
• Increasing friction amongst state institutions.
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... the economic and social sector performance of Pakistan has also been severely impacted by the following:
1) Inability of the successive governments to balance their budgets by increasing tax to GDP ratio, reducing non-development expenses and losses of the Public sector enterprises.
2) Negligible expenditures on education and health sectors to develop our most important asset i.e. human resource.
3) Creating a competitive environment of high economic growth by focusing on the productive sectors of our economy such as agriculture and manufacturing, and
4) Focusing on infrastructure and energy sectors to facilitate the economic growth.
Whereas, we have seen efforts in the past to address these weaknesses they have been at best weak and far between.
The present economic scenario is again infected by the same weaknesses i.e. large fiscal deficits, low expenditure on education and health, chronic electricity and energy shortages, lack of focus on the productive sectors resulting in high inflation, high unemployment and low economic growth. We all want a Pakistan which is economically prosperous, institutionally resilient and strategically oriented. In essence, we want to make Pakistan an economic welfare state. In my view, a key pre-requisite for an Economic Welfare State is to ensure that a country experiences equitable and sustainable growth for a prolonged period of time. Look at the examples of India and China where uninterrupted economic growth has changes the whole value proposition of these countries.
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To reduce our fiscal deficit we will have to increase our taxes. As I have said it many a times, all incomes will have to pay taxes and there cannot be any sacred cows. Agriculturists will have to pay their taxes and so should the retailers, real-estate developers stock-market and all professionals. Our tax to GDP is woefully inadequate at 9pc, where Sri Lanka is 17pc, India 19pc, China 21pc and Turkey 33pc. Before I left the government, there was a tax plan in place, which needs to be implemented. It will require a strong political will.....
http://www.nation.com.pk/pakistan-news-newspaper-daily-english-online/business/25-Nov-2012/economic-challenges-for-pakistan-going-into-2013
Here's ET on increasing e-banking in Pakistan:
ReplyDeleteThe overall value and volume of e-banking transactions throughout the country increased during the second quarter (October to December 2012) to Rs 7.6 trillion (18.02 per cent)and Rs 79.45 (11.31 per cent) million respectively, the State Bank of Pakistan reported on Wednesday.
State Bank of Pakistan’s Payment Systems report for the second quarter of FY13 released today revealed that the branches of 484 banks in Pakistan were added to the Real-Time Online Branches (RTOB) network during the second quarter of the current fiscal year (FY13) and now 94 percent branches are offering online banking services.
Calculating the overall internet banking services across the country, overall 9,896 branches of banks out of 10,523 are offering the service. During the second quarter, the overall value and volume of internet banking transactions had seen an increase in of 18.82 percent and 14.29 percent in the overall value and volume of internet banking from the first quarter of 2012, respectively.
The Payment Systems infrastructure in the country had also seen an increase because of the installation of 245 new Automated Teller Machines at banks around the country. Today, the number of ATMs across Pakistan has reached a total of 6,232. The report further said that ATM transactions had a major share of 61.12 percent in terms of transaction volume with an average value of Rs9,779 per transaction.
The overall e-banking transactions in value terms was 6.27 percent during the second quarter, increasing the value and volume of ATM transactions by 10.33 percent and 10.68 percent respectively in the second quarter as compared to the first quarter of the current fiscal year.
The report also said that over 20.72 million banking cards were issued in the country by the end of December, 2012, witnessing an increase of 5.33 percent in the second quarter compared to the preceding quarter.
Point of Sale (POS) terminals showed a growth of 6.25 per cent and 5.06 per cent in value and volume respectively as compared to the first quarter of the current fiscal year, with value and volume of transactions standing at Rs22.1 billion and Rs4.5 million, respectively, in the second quarter.
The report also pointed out an increase of large-value payments through Real Time Gross Settlement (RTGS) with 9.46 percent in value and 10.35 percent in volume as compared to the first quarter. The recorded value and volume was Rs42.13 trillion and Rs12.16 billion respectively in the second quarter.
The report also revealed that major portion for the increased number of overall Pakistan Real Time Interbank Settlement Mechanism (PRISM) transactions increased 14.06 percent during the same period, which was contributed by Interbank Funds Transfers (IBFT). Similarly, the value of overall PRISM transactions increased by 14.96 percent due to securities settlement.
http://tribune.com.pk/story/506723/e-banking-transactions-cross-rs7-trillion-state-bank/
Here's a Dawn report on avg 2.9% gdp growth rate in last 5 years since Musharraf's departure:
ReplyDeleteThe economy grew at an average rate of 2.9 percent per annum during the last five years though GDP growth witnessed growth in financial year 2012-13 to stand at 3.6% against the target fixed was 4.3%, the yearly report published by Federal Board of Revenue (FBR) said.
The performance by the important sectors of economy like agriculture, manufacturing and services remained below their capacity. However, the recent EU approval of duty waiver in the form of awarding GSP PLUS status (Generalized System of Preferences Plus) has created much wanted space for the economy.
Duty free access to Pakistan’s exports to the bloc of 27 member countries of European Union has offered much attention for the domestic and Chinese investors. The Chinese investors have started entering into joint ventures with local manufacturers to take advantage of trade concessions. Due to these developments, the ambitious growth of textile and clothing sector has become possible. One may hope that a prudent use of EU duty concessions avoiding any caveat therein will lead towards improvement of business environment and to the desired destination of economic stability.
The economy of Pakistan continued facing various shocks since beginning of FY: 2012-13. The energy crises got complex and worsened. The security hazards vastly affected the economic and social environment. The fight against terrorism got another additional front of sectarian extremism. The extensive financial constraints, economic mismanagement and less than capacity electricity generation despite its acute shortage have been the major weaknesses in the economy. An estimate indicated that around 2% of the GDP has been washed away due to power shortage. Moreover, the challenging scheduled payments due, to the international donor agencies added further difficulties for the economic management.
However, the positive aspects of the economy included comparatively lower trade deficit, strong remittances and above 33% decline in inflation rates i.e., reduced from 11.0% in 2011-12 to 7.4% in FY: 2012-13. Some prudent measures have been taken for improvement of economy (most important step was the settlement of circular debt to the tune of Rs 480 billion which paved the way of 1700 megawatts additional electricity generation). Similarly, easy monetary policy with low interest rate during the FY: 2012-13 increased the cheap credit borrowing by the corporate sector. Resultantly, improved performance by the large scale manufacturing sector became possible and observed.
Despite unfavorable economic conditions, the FBR has been able to collect Rs 1,946 billion at the end of the fiscal year 2012-13. A growth of 3.4 percent over last year’s collection has been recorded. The FBR revenue target for the FY: 2012-13 was fixed at Rs 2,381 billion with an envisaged growth of 26.5% over last year’s collection of Rs 1,883 billion. Keeping in view the broad based challenges faced by the economy, the revenue target was revised downward to Rs 2,007 billion and expected a growth of 6.6%. The important indicators considered for assigning of revenue targets includes expected growth in GDP, the rate of inflation, level of ease in monetary policy, growth in the Large Scale Manufacturing sector, tax buoyancy, budgetary measures and imports.
http://www.dailytimes.com.pk/business/27-Feb-2014/pakistan-s-gdp-grow-2-9-in-5-years