ICCI shows concerns over high trade deficit
The Islamabad Chamber of Commerce and Industry (ICCI) has shown concerns over a record high trade deficit that has touched $37.7 billion during the fiscal year 2017-18, stating that it would put more pressure on declining foreign exchange reserves. ICCI President Sheikh Amir Waheed said that as per the recent figures of the Pakistan Bureau of Statistics (PBS), Pakistan’s imports were recorded at $60.9 billion in the previous fiscal year, against $52.9 billion a year before, showing an increase of 15.1%. He said the trade deficit of Pakistan was around $20 billion in 2013, which has increased by over 85% during the last five years. “It shows that our policymakers paid no serious attention to support the private sector in promoting import substitutions, in order to reduce imports and improve exports,” stated the ICCI chief. “The Strategic Trade Policy Framework 2015-18 had set an export target of $35 billion for the fiscal year 2017-18, but during the year, our exports remained far below the desired target reaching $23.2 billion,” he added.
SBP predicted to hike interest rate, but analysts divided over how much
The State Bank of Pakistan (SBP) is likely to increase the benchmark interest rate by 50 to 100 basis points (Saturday), as expectations of a higher pace of inflation in months to come become stronger.
Several brokerage houses anticipate a rate hike in the range of 50 to 100 basis points. At present, the key interest rate stands at 6.5%.
A higher interest rate makes borrowing expensive, and slows down economic growth by curtailing demand.
SPI decreases 0.58pc
The Sensitive Price Indicator (SPI) for the week ended July 12, 2018 registered a decrease of 0.58% for the combined income group, going down from 230.11 points in the previous week to 228.78 in the week under review. Compared to the corresponding week of previous year, the SPI for the combined income group rose 4.25%. The SPI for the lowest income group decreased 0.22% compared to the previous week. The index for the group stood at 215.86 points against 216.33 in the previous week, according to provisional figures released by the Pakistan Bureau of Statistics. During the week, average prices of 18 items rose in a selected basket of goods, prices of eight items fell and rates of remaining 27 goods recorded no change.
PKR weakens against Dollar
The rupee weakened against the dollar at Rs121.45/121.65 in the inter-bank market on Friday compared with Thursday’s close of Rs121.4/121.6. Contrary to the impression created after the previous round of devaluation, the Pakistani currency weakened further by 3.65% in its third round last month. Since December, the rupee has cumulatively shed around 13% of its value after the central bank reportedly abstained from intervening in response to the pressure due to a widening current account deficit. The State Bank of Pakistan has maintained that the slide in the rupee’s value is due to supply and demand dynamics of foreign exchange in the inter-bank market. While it has promised prompt intervention in case of speculative or momentary pressures, the central bank will sit on the fence and let “market-driven adjustment in the exchange rate to continue to contain the imbalance in the external account and sustain a higher growth trajectory”, according to a press statement. Market rumours suggest the move is part of IMF’s conditions for another bailout package.
Tax amnesty about accountability: FBR
The tax amnesty has received a better response compared with the previous scheme, and details are still being updated by the Federal Board of Revenue (FBR).
Addressing the third awareness session on the ‘Tax Amnesty Scheme 2018’, FBR Director General Withholding Tax Mehmood Aslam Lillah said placing Pakistan in the grey list has forced strict monitoring of capital movement. Additionally, 143 countries under an international convention are bound to pass on bank account information and transactions of foreigners through an automatic exchange of information system.
He said these two factors have particularly made it impossible to conceal assets or accounts in other countries. “In this scenario, the amnesty scheme is an appropriate and timely measure,” said the official.
He lamented that some elements were reluctant to pay 5% on foreign assets and were expecting this rate to be slashed. However, the caretaker government has refrained from doing so, stating that it does not have the mandate except for announcing an extension.
He said that the ultimate objective of this scheme is not to generate revenue as government’s focus was accountability of undeclared assets.
Regarding the valuation of the properties purchased years ago, the official said that a clear formula has been mentioned in the scheme under which the land rates will be determined in accordance to the prevailing DC or RTO rates, however, the cost of structure could be determined at the rate of Rs400 per square feet.
Commenting on withdrawal of withholding tax on bank transactions, he said that its ultimate objective was to broaden the tax base but it could not yield required results due to different reasons.
Caretaker arrange calls CDWP meeting, exceeds mandate
The caretaker government, which seems to be exceeding its constitutional mandate, has called a meeting to approve about one-and-a-half dozen development projects that cost Rs709 billion, financially binding future federal and provincial governments.
The meeting of the Central Development Working Party (CDWP) has been convened for the coming Monday – nine days before the general elections scheduled for July 25. In order to remove an administrative barrier to hold the meeting, the caretaker government has also given the charge of Planning Commission Deputy Chairman to Minister for Finance and Planning Dr Shamshad Akhtar.
“The competent authority has been pleased to allow caretaker Minister for Planning, Development and Reform to hold the charge of the Deputy Chairman Planning Commission with immediate effect,” according to a notification of the Establishment Division dated July 12.
This is the second attempt by the caretaker government to conduct the CDWP meeting. A similar attempt was also made in June but the planning ministry had to cancel the meeting on the intervention of caretaker finance minister Dr Shamshad Akthar.
Chamber says academia-industry linkages
The developed world has achieved phenomenal economic growth by promoting academia-industry linkages and Pakistan will have to adopt the same approach.
These views were observed by Islamabad Chamber of Commerce and Industry (ICCI) Senior Vice President Muhammad Naveed Malik while talking to Institute of Space Technology (IST) Vice Chancellor Imran Rehman during his visit along with a delegation.
Malik highlighted that universities have an updated pool of knowledge and they should help in resolving key issues of the local industry. He further emphasised that universities should focus on applied research that would help in addressing major problems of the society. “Over 60% of our population comprises youth while thousands enter the job market annually,” said Malik. “However, our public and private sectors are incapable of providing them jobs.”
He added that to cope with the issue of rising unemployment, universities should focus on fostering entrepreneurship in students that would enable them to become job creators instead of job seekers.
Speaking on the occasion, Rehman said universities could help in improving the productivity, efficiency and competitiveness of industry for which strengthening academia-industry linkages was important. “Research departments of universities are conducting good research in various fields,” he added. “But due to lack of coordination, local industry is unable to take benefits of the research work.”
He urged the industry to share its problems so that the academia could play a role in addressing them. He hoped ICCI’s efforts would contribute in improving academia-industry linkages that would lead to accelerating economic growth and strengthening the economy. On the occasion, ICCI delegation members gave useful tips to IST students for achieving success in business field.
PM rolls out Pak-China optical fiber cable project
Caretaker Prime Minister Nasirul Mulk on Friday inaugurated the Pak-China Optical Fiber Cable project which will provide first hand land-based connectivity to the country.
The newly rolled-out project will lower the country’s dependence on the submarine cable.
The ceremony was held in the federal capital was jointly organised by the Special Communication Organisation (SCO) and Huawei.
Moreover, the attendees included Minister in-charge for Information Technology and Telecommunications Yousuf Sheikh, Director General Special Communication Organisation (SCO) Maj Gen Amir Azim Bajwa, Chinese Ambassador Yao Jing, as well as, Huawei Middle East region President Charles Yang.
Foreign exchange: SBP’s reserves fall below $9.5bn as concerns rise
Foreign exchange reserves held by the State Bank of Pakistan (SBP) plunged 3.16% on a weekly basis, according to data released by the central bank on Thursday, raising concerns over the country’s ability to finance a hefty import bill and meet debt obligations in coming months.
On July 6, foreign currency reserves held by the central bank were recorded at $9,479.5 million, down $309.3 million compared with $9,788.8 million in the previous week.
The decrease was due to external debt and other official payments, according to the SBP statement.
Overall, liquid foreign reserves held by the country, including net reserves held by banks other than the SBP, stood at $16,084.3 million. Net reserves held by banks amounted to $6,604.8 million.
Cement industry foresees 50pc capacity expansion
Pakistan’s cement industry is gearing up for nearly 50% increase in its capacity over the next few years, according to the State Bank of Pakistan’s third quarterly report for fiscal year 2018 on the state of economy.
Rising demand and healthy margins have induced cement manufacturers to expand their production capacities aggressively, from the present 49.4 million tons to 72.8 million tons in the next few years, the report said.
‘Pakistan needs 6.6pc growth to accommodate new job seekers’
Pakistan will need to achieve a growth rate of 6.6% to accommodate new job seekers of around 1.3 million each year, according to the State Bank of Pakistan (SBP).
Independent economists anticipate a notable slowdown in the economy to 4.8% in the ongoing fiscal year, barely a year after Pakistan achieved a 13-year high growth rate of 5.8% in fiscal year 2018, according to official figures.
The trend suggests the number of unemployed people would sharply surge this year from the estimated 3.5 million at present.
The central bank, however, remained optimistic that the country may create comparatively higher number of job opportunities this year due to development taking place on the multi-billion dollar China-Pakistan Economic Corridor (CPEC) and through supporting the Small and Medium-sized Enterprises (SME) sector.
“Empirical evidence on the relationship between growth and employments suggests that every percentage point increase in growth results in creation of 0.2 million jobs (in Pakistan),” the central bank said in its latest quarterly report on the state of economy for FY18.
Better infrastructure is one of the important ways to promote employment opportunities as it facilitates business activities. In the context of Pakistan, CPEC-related infrastructure development is projected to spur business growth, especially with development of Special Economic Zones, it said.
Second, integration with the global markets enhances productivity and thereby real wage rate. “Recently, Pakistan’s exports have started showing signs of recovery under supportive government policies and recovery in global demand,” it said.
Shamshad sees debt growing to 74pc of GDP by June 2019
Caretaker Finance Minister Dr Shamshad Akhtar has said that public debt has increased to an unsustainable level of Rs24.5 trillion or 72% of total size of economy – the highest level in 15 years – due to weak economic management, linking the last political government with current economic mess.
Speaking on the issue of public debt at a seminar on Wednesday, the minister feared that the debt level would further increase to 74% of gross domestic product (GDP) by June 2019.
She stressed the need for immediately following a fiscal consolidation path by restricting expenditures and enforcing a radical plan for domestic revenue mobilisation.
The public debt of Rs24.5 trillion included domestic debt of Rs16.5 trillion and external debt of Rs8 trillion.
“To manage the debt level, Pakistan has to have a strategy to combat low domestic resource mobilisation and go after tax evaders,” she said and added weak economic management was the key reason behind such a high debt level.
She also criticised the last government’s exchange rate policy, saying “we were as if in a pseudo fixed exchange rate regime.”