Pak urges to focus on EU, not just China
Pakistan, while focusing on the China-Pakistan Economic Corridor (CPEC), should also look beyond in the European Union (EU), amid the scenario evolving in the aftermath of Brexit, which is due next year. The EU is a market of 460 million people and Pakistan should explore it to tap the trade and investment potential. For this to happen, Pakistan needs to build an positive image, enhance engagements with EU countries and improve its human rights status. Speaking on the occasion, Dr Pál Belényesi, managing director, Brussels Consulting and Independent Scientific Adviser to the European Parliament, said Pakistan should explore more options for trade and expand its export markets, as relying on a single trading partner is not wise. He said Pakistan’s economy is not diversified enough and its industries should be open to transformation to reap maximum trade benefits. At this point in time, the EU is Pakistan’s largest trading partner when it comes to net trade balance and contributes almost 25% of total Pakistan’s foreign direct investments (FDIs), he added.
LNG back to being ‘natural gas’ as PM accepts redesignation
Presiding over a meeting of the Economic Coordination Committee (ECC) of the Cabinet, the prime minister approved redesignating liquefied natural gas (LNG) as natural gas under the 2002 Oil and Gas Regulatory Authority (Ogra) Act that he had ‘defined’ as petroleum product under the 1961 Petrol Product (Petroleum Levy) Ordinance in April 2015. “The ECC approved a proposal for introducing necessary amendments in the Ogra Ordinance 2002 to cover the entire LNG/RLNG supply chain in the Ogra regulatory framework and to remove anomalies in the dispatch, receipt and billing of RLNG volumes,” said a brief statement issued after the meeting. The purpose of including LNG under the definition petrol product in 1961 law three years ago was to bypass provincial involvement in decision making regarding LNG imports by the Pakistan State Oil (PSO) and at the same time avoid public hearing for regasified-LNG (RLNG) and instead fix its prices on the advice of PSO. Informed sources said the redesignation of LNG as ‘gas product’ instead of ‘petroleum product’ was necessitated by legal objections raised by the auditors. The summary for the change was moved in the morning and approved within hours by the ECC before stakeholders could file written comments, these sources said.
The RLNG pricing mechanism would, however, remain unchanged and take place on monthly basis without public hearing to ensure continuous billing cycle. The element of unaccounted for gas (UFG) of RLNG would, on other hand, become part of the revenue requirement of the gas companies and dealt separately on biannual basis.
Pakistan’s trade deficit widens 14.3pc to $29.8 bn
Pakistan’s trade deficit is now near $30 billion in just ten months, which is higher than even revised estimates despite solid growth in exports for the second month in a row. Pakistan exported goods worth $2.13 billion in April, a year-on-year increase of 18.7%, according to the Ministry of Commerce. The growth in exports came on the back of tax incentives and rupee devaluation. “Pakistan is now 8th in the world in terms of export growth, coming up from 158 in 2016-17,” said Commerce Secretary Younus Dagha while hoping that the growth momentum will continue in the remainder two months of the fiscal year. But the increase in exports was outpaced by soaring imports. The trade deficit still widened 14.3% year-on-year to $29.8 billion in the cumulative ten-month period (July-April), surpassing the revised estimated deficit for the entire fiscal year. Against the original trade deficit estimate of $25.7 billion, the Ministry of Finance had estimated that the deficit could swell to $29.4 billion for fiscal year 2017-18 due to higher imports. The higher-than-officially-projected trade deficit in just ten months will have adverse implications for both the current account deficit and foreign currency reserves. Foreign currency reserves are already hovering in the trajectory of $11 billion despite commercial loans from China.
Government unwilling to share data with NAB
The government is reluctant to hand relevant documents against officials of the Sui Southern Gas Company, Pakistan Steel Mills and other institutions who are allegedly involved in corruption over to the National Accountability Bureau (NAB). The government’s reluctance stems from the treatment meted out to former head of the Lahore Development Authority Ahad Khan Cheema by the top anti-corruption body. Cheema was arrested from his Gulberg office in Lahore after he failed to comply with the NAB’s summons. The arrest of a high-ranking administrative officer had drawn sharp protest from certain quarters in the Punjab bureaucracy. NAB had approached the Cabinet Division to provide proceedings of the federal cabinet, the Economic Coordination Committee (ECC) and cabinet bodies in order to proceed with the cases of several officials of public sector enterprises (PSEs) – including SSGC and PSM. However, the division did not share the record. Because of fear of being persecuted by NAB, bureaucrats have almost stopped taking government business. To stop the state machinery from being completely paralysed, the government has started an intra-departmental discussion over whether the record asked for by NAB should be handed over to it or not. A senior government official told that the matter was taken up in a meeting of the cabinet held last month. During the meeting, the participants were informed that NAB had approached the Cabinet Division with the request to seek documents pertaining to the cabinet and the Economic Coordination Committee in connection with an inquiry.
Remittances fall 6.9pc to $1.65bn in April
Overseas Pakistani workers remitted $1.65 billion in April 2018, decreasing 6.89% from March 2018, according to the State Bank of Pakistan (SBP). However, the amount was up 7.25% from the same month of previous year. Total remittances for the first 10 months (July-April) of the current fiscal year 2017-18 amounted to $16.2 billion, 3.92% higher than $15.6 billion in the corresponding period of last year, the central bank reported. The bank recently anticipated in its quarterly report on the state of economy that Pakistan would attract a maximum of $20.5 billion in remittances in FY18. If its projection is met, then total remittances will be slightly higher than last year’s number of $19.3 billion, but will fall short of the target of $20.7 billion. The slight pickup in remittances, however, was insufficient to offset the impact from excessive imports and an unsatisfactory increase in exports. As a result, Pakistan’s current account deficit continued to expand and the gap widened 50.6% year-on-year to $12.03 billion in first nine months of FY18, eating up foreign exchange reserves at a fast pace.
Saudi Arabia remained the single largest source of remittances to Pakistan, but inflows slowed down. Pakistanis living in the Gulf Arab kingdom sent $399.56 million in April 2018, which was 9.01% lower than $439.13 million in the same month of last year.
Miftah refuses proposal to cut petroleum levy
Federal Minister for Finance, Revenue and Economic Affairs Miftah Ismail has hinted at accepting an overwhelming majority of recommendations given by the Senate on the proposed budget but refused to accept the demands to increase income tax rates and cut petroleum levies. Out of 48 general consensus recommendations that the Senate has given, the finance minister has indicated accepting about 42 of them. The general recommendations would address most of the concerns of the opposition parties in addition to accommodating the business interests of some of the senators.
But the finance minister remained non-committal on the issue of aligning taxes and duties on hybrid and electric cars. In the budget, the government has proposed to cut duties and taxes on electric cars but retained higher taxes on hybrid cars. The consensus on almost 80% of the recommendations was achieved during a meeting between the senators belonging to the opposition parties and Minister for Finance Dr Miftah Ismail, indicating that the government is keen to accommodate the opposition parties for smooth sailing of the budget. This also suggests that the political parties are ready to work together on important economic issues. The senators from the mainstream opposition parties, who are also members of the Senate Standing Committee on Finance, met on Wednesday with the minister for finance.
Cement rates to shoot as players reach consensus
Cement manufacturing companies are set to increase prices by Rs15 to Rs20 for a 50-kg bag, a move that comes after they reached a consensus on production according to a stipulated quota. High supply levels and increased cost of production have resulted in lower profitability for cement companies in recent times, suggest analysts, adding that the move to increase prices is already in motion. A consensus has been reached among cement producers to increase prices, it is confirmed. Companies have been producing as much as they could sell for around the last eight months, but they have now reached a consensus.
Kyrgyzstan wants to improve bilateral trade
Ambassador of Kyrgyzstan Erik Beishembiev said his country wants to improve bilateral relations with Pakistan, stressing that there exists potential to increase bilateral trade. The envoy stated this while addressing a delegation of the Islamabad Chamber of Commerce and Industry (ICCI) led by vice-president Nisar Ahmed Mirza. Both countries enjoy good relations that are growing with the passage of time, said Beishembiev. “We have historical roots, common religion, similar traditions and world views on many issues. In recent years, leadership of both countries has shown motivation to further strengthen and develop bilateral and regional cooperation. He said Kyrgyzstan is interested in solving Pakistan’s energy crisis and actively promoting the CASA-1000 power export project. He added that bilateral trade potential has not been realised and there is a dire need of strong measures to improve the existing volume. Speaking at the occasion, Mirza said that Pakistan and Kyrgyzstan enjoy excellent political relations that should be transformed into growing trade and economic relations. “Kyrgyzstan should consider launching direct flights to Pakistan that would help in improving relations,” said Mirza. “Being members of the Central Asia Regional Economic Cooperation (CAREC), both countries can jointly achieve goals in the areas of transport, energy and trade policy to alleviate poverty from the region.”
With no new taxes, Sindh does not launch finance bill
For the first time in history, the Sindh government has not introduced the finance bill along with the budget for fiscal year 2018-19 in an apparent bid to show that it has not imposed any new tax. However, the provincial administration has ramped up revenue collection target by 23% to Rs243.08 billion for next year. For the current fiscal year FY18, the government has revised downwards the tax collection estimate to Rs196.96 billion from the original target of Rs199.62 billion. The province will continue to collect a large part of the Rs243-billion revenue target from the common man in the shape of indirect taxes. Budget documents suggest the government will collect 85.03% (Rs206.71 billion) in indirect taxes and a meagre 6.80% (Rs16.55 billion) in direct taxes. The remaining 8.15% (Rs19.81 billion) will be collected in non-tax revenue.
PKR 6.83bn allocated for ongoing transport schemes
Like other sectors, the transport sector also did not receive any new development schemes in the provincial budget for the fiscal year 2018-19 announced on Thursday. For ongoing schemes of the transport and mass transit department, the Sindh government has allocated Rs6.83 billion in the Annual Development Programme (ADP). In addition to the aforementioned amount, Rs599.7 million will be spent on transport schemes through foreign project assistance. No allocation was made in the budget for the procurement of buses for the Green Line Bus Rapid Transit (BRT) scheme. The BRT is currently under construction with funds provided by the federal government. However, after the expected completion of the BRT from Surjani Town till Gurumandir in June, the project will be handed over to the provincial government for which it will have to procure buses. Commenting on the matter, Transport Secretary Saeed Awan said buses for the Green Line BRT would be procured under public-private partnership mode, which was the reason it was not reflected in the budget. “The operator will bring the buses at his own cost,” he explained. Meanwhile, the provincial government-funded Orange Line BRT, which is a smaller scheme than the Green Line BRT, will not see the light of day until the end of the next fiscal year, according to the ADP document. It is now expected to be completed in June, 2019.