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Pakistan’s power generation up 2.3pc, but reliance on furnace oil decreases

Power generation through furnace oil and hydel reduced 51% and 22%, respectively, in November year on year although overall generation increased by 2.3% in the month, according to data released by the National Electric Power Regularity Authority (NEPRA).

The energy mix witnessed a major change as Re-gasified Liquefied National Gas (RLNG) and Coal-fired power plants produced greater energy in November. Power generation increased by 2.3% year on year 6,994 GWh during November 2017 compared with 6,840 GWh during the same month last year.

The change in the energy mix comes as Pakistan decides to opt for low cost fuels in producing energy.

Coal based generation increased by 40% month on month to 962 GWh due to induction of Port Qasim Coal Power Plant. Gas based generation also went up by 5.6% month on month, however, hydel, furnace oil, RLNG and nuclear based generation decreased by 9.3%, 74.5%, 55.1% and 24.3%, respectively.

For over two decades, furnace oil plants have played an important role in the energy mix of Pakistan. However, the situation is fast changing as the country is increasing the share of other fuels like RLNG, Coal, Nuclear etc.

Pakistan Prime Minister Shahid Khaqan Abbasi ordered immediate closure of eight furnace oil-based power plants of over 4,000 megawatts with the start of coal and LNG-based plants of over 5,000 megawatts by the end of October 2017.

World bank approves $825mn loan

The World Bank has approved a loan package of $825 million for improving Pakistan’s public finance management by introducing a new law and upgrading the country’s dilapidated power transmission system to support new generation in the sector.

But the Washington-based lender has pegged the disbursement of $400 million loan for Public Finance Management with the introduction of a new law in parliament, highlighting adverse implications of growing dependency on the lenders on the country’s public policies. The Board of Directors of the World Bank also approved a $425-million loan for National Transmission Modernization Project-I, taking total disbursement to $825 million.

The $425-million loan has been obtained on commercial terms that will be returned over a period of 21 years, including a grace period of 6 years. The PFM reform programme is financed by the International Development Association, the World Bank’s fund for the poor, with a maturity of 25 years, including a grace period of five years.

The $425 million loan will be utilised to modernise the national transmission system by rehabilitating selected 500kV and 220kV substations and transmission lines. The existing transmission system has the capacity to dispatch about 15,000-17,000 megawatts of electricity safely, which is substantially below the generation constrained peak load of over 20,000 MW, according to the World Bank.

It said that system reliability has deteriorated substantially, resulting in several instances of major system collapse in recent years, which appear to be increasing in frequency and severity.

Current account deficit now stands at $6.64b, up 89pc

Pakistan’s current account deficit widened 89% in the first five months (Jul-Nov) of the current fiscal year 2017-18 (FY18), amounting to $6.64 billion compared with $3.51 billion in the same period of the previous year, according to data released by the State Bank of Pakistan (SBP) on Wednesday.

In November 2017 alone, the current account gap swelled $1.44 billion compared with $1.30 billion in October 2017.

Investors have shown concerns about the growing deficit after the country recorded a much higher-than-expected deficit of $12.4 billion (4% of gross domestic product – GDP) in the previous fiscal year that ended on June 2017. The deficit in FY16 was just $4.86 billion.

With the difference between exports and imports being the biggest determinant of the current account balance, a deficit or surplus reflects whether a country is a net borrower or net lender with respect to the rest of the world. To control the gap in imports and exports, the government in October enhanced regulatory duties by up to 350% on 356 essential and luxury goods that is expected to dent the rising import bill in coming months.

Last week, as per the anticipation of market observers, the government let the rupee lose about 4.67% of its value against the dollar.

This is expected to reduce imports while supporting exports thus eventually curtailing the growing current account deficit in the coming months.

Pak, Uzbekistan to enhance agri-cooperation

Pakistan and Uzbekistan agreed on Wednesday to enhance bilateral cooperation and share expertise in the fields of agriculture and livestock for their development in both the countries.

The understanding was reached in a meeting between Uzbekistan Ambassador to Pakistan Furkat A Sidikov and Pakistan Agriculture Research Council (Parc) Chairman Yousuf Zafar.

The ambassador also visited the National Agricultural Research Centre (Narc) and discussed various avenues of mutual cooperation for the development of agriculture sectors of both the countries.

During the meeting, the two sides discussed areas of mutual interests including agriculture, agro-machinery manufacturing, food processing, dry fruits, fresh fruits, cotton, milk and its by-products and leather.

Speaking on the occasion, Parc Chairman Yusuf Zafar informed the Uzbek ambassador of the tremendous opportunities for mutual cooperation in the above-mentioned areas. He also highlighted the importance of these sub-sectors of agriculture for the country’s economy.

Pak eager to start FTA talks with pacific countries

Pakistan wants to initiate negotiations with the Pacific and Southeast Asian countries for free trade agreements (FTAs) in an effort to enhance trade and export competitiveness, a senior official of the Ministry of Commerce told APP on Wednesday.

These countries include Japan, Indonesia, Vietnam and the Philippines from the Pacific region, the official said. Pakistan and Indonesia have already agreed on concessions on 20 different items during bilateral negotiations for a preferential trade agreement (PTA).

Both sides discussed 20 tariff lines and Jakarta agreed to give concessions on major export products of Pakistan including rice, textile, ethanol, citrus (kinnow) and mango, he said. “Concession on 20 tariff lines is a major success for Pakistan and now citrus and mango exports to Indonesia are expected to increase,” the official added.

Indonesian show keen interest in Punjab

A group of Indonesian investors has shown keen interest in investing in Punjab.

It said that the provincial government is taking measures to boost investment and create a friendly environment.

A high-profile business delegation from Indonesia is on a three-day visit to Punjab. The delegation aims to establish and boost trade relations between the two countries.

In a statement, it was said that this landmark visit is of utmost importance as it would explore new avenues for trade, investment and joint ventures that would help in accomplishing the mutual target of sustainable economic development.

The delegation also visited few potential sites such as Faisalabad Industrial Estate and PIEDMC, where they got engaged in extensive B2B meetings and discussed available opportunities. The team showed immense interest in expanding their business. A presentation regarding Special Economic Zones, concerning the overall investment opportunities in Punjab regarding business, agriculture and tourism were also displayed to the delegation.

Oil refineries get entangled in ‘worst’ operational shortages

Petroleum refineries are trapped in the worst operational crisis in the country’s history due to government’s inefficiency and poor planning, and its latest decisions are compounding the problems instead of resolving them, say industry officials.

The refineries, which meet 30% of the country’s needs, are feeling suffocated following excessive imports of furnace oil and liquefied natural gas (LNG) to run power plants.

With these imports, almost all the oil storage facilities in the country are filled to capacity, including those maintained by the state-owned Pakistan State Oil (PSO). This glut has virtually closed down the refineries.

Despite the grave situation, the government has continued to allow furnace oil and LNG imports instead of reviewing its policy in order to give some space to the domestic refineries.

“The laws (licensing rules for oil marketing companies) strictly bind oil marketing companies to first lift locally produced petroleum products…and they will have to take NOC (no-objection certificate) from refineries for imports – if necessary,” an industry official claimed, adding the rules were being violated since long.

Islamic finance attracts non-Muslim states

Islamic finance is extremely popular in Muslim-majority countries in the Middle East and South Asia. However, non-Muslim countries are now seeing the attraction in investing in it.

According to Dealogic data, issuance of Islamic debt by non-Muslim countries is set to climb a three-year high in 2017 due to the perception of more tranquil market conditions and an improving regulatory backdrop.

Islamic financial products comply with Islamic law and are based on the principles of risk and profit-sharing. Sharia prohibits earning an interest on loans and also disallows funding activities involving alcohol, pork, pornography or gambling.

The value of Islamic bonds issues outside the Middle East and Southeast Asia by non-Muslim countries reached $2.25 billion in 11 months in 2017, shows data by Dealogic. In 2016, it was $2 billion and $1 billion in 2015.

Islamic finance has transformed from a niche market of global banking to a growing source of funding through a storied list of borrowers who have sold sukuk in recent years.

The government of Singapore was one of the earliest non-Muslim countries to enter this market, followed by the United Kingdom, Luxembourg, and Hong Kong who sold their first sukuk in 2014. Recently, African nations including South Africa, Nigeria and Ivory Coast have made legal and tax changes to make it easier for borrowers to issue Islamic bonds.

Companies like Goldman Sachs and General Electric’s GE Capital have also been selling Islamic bonds in the past few years.

Chinese entities such as Country Garden and Beijing Enterprises Water Group have also issued Islamic bonds through their Malaysian subsidiaries in 2015 and 2017, respectively. The companies then used those proceeds to finance projects in Malaysia.

According to experts, the global financial crisis led governments to diversify funding options. Islamic finance is seen as more stable when compared to the conventional banking system and thus appealed more to borrowers.

“Heightened appeal for sustainable and responsible investing could also be driving the growth for Islamic finance due to the commonalities in values and shared principles,” Ruslena Ramli, head of Islamic finance at Malaysian credit rating agency RAM, told CNBC.

Sharia principles, which prohibit “speculative-type of businesses,” ensured Islamic finance products were less volatile when global financial markets were rumbled during the debt crisis, said Ahmad Fuzi Abdul Razak, the secretary general of the World Islamic Economic Forum Foundation.

“The crisis that took place was a result of excessive speculation, which is harmful. Islamic finance has avoided such pitfalls,” he told CNBC.

However, while Islamic finance is growing it is still small. Involvement by those outside the Muslim world is still ‘sporadic’ say experts.

Dealogic data shows that the Middle East and Southeast Asia still account for a large majority of Islamic financial assets. In the sovereign sukuk space, Middle Eastern countries raised $11.85 billion in the 11 months through November, followed by Southeast Asia at $3.96 billion

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