Early exit from FATF grey list improbable
Pakistan is unlikely to have an easy exit from the Financial Action Task Force (FATF) grey list, as the provisional assessment reveals that Islamabad is fully or partially non-compliant with 28 out of 40 recommendations, said highly placed government sources.
The staggering non-compliance figure, which makes up 70% of the total recommendations, suggests that the authorities have to double their efforts to exit the grey list in the next one year.
A report by the Asia Pacific Group (APG) –an FATF styled regional body – has provisionally assessed Pakistan aimed at highlighting the loopholes that have to be plugged in to avoid being blacklisted.
The FATF has developed 40 recommendations to curb money laundering and terrorism financing in the world and every jurisdiction is assessed based on these global standards.
Pakistan’s legal and regulatory regime has to be drastically amended in next few months, which seems an uphill task given the political polarisation in the country.
SPI decreases 0.14pc
The Sensitive Price Indicator (SPI) for the week ended October 18, 2018 registered a decrease of 0.14% for the combined income group, going down from 238.82 points in the prior week to 238.49 in the week under review. However, the SPI for the combined income group rose 5.89% compared to the corresponding week of previous year. The SPI for the lowest income group decreased 0.21% compared to the previous week. The index for the group stood at 219.33 points against 219.79 in the previous week, according to provisional figures released by the Pakistan Bureau of Statistics.
Ogra increases minimum charges for gas consumers
The Oil and Gas Regulatory Authority (Ogra) has increased minimum charges for two categories of gas consumers including commercial units.
Following directives of the federal government, Ogra has revised minimum charges for government and semi-government offices, hospitals, clinics, maternity homes, government guest houses, armed forces mess, universities, colleges, schools and private educational institutions, orphanages and other charitable institutions along with hostels and residential colonies to whom gas is supplied through bulk meters including captive power.
The minimum charges for these have gone up from Rs1,053 per month to Rs4,680.09, up Rs3,627.09.
Similarly, the minimum charges have also been increased for all establishments registered as commercial units with local authorities or dealing in consumer items for direct commercial sale like cafes, bakeries, milk shops, tea stalls, canteens, barber shops, laundries, hotels, malls, places of entertainment like cinemas, clubs, theaters, private offices, corporate firms, etc.
The minimum charges for them have been increased from Rs4,625.60 per month to Rs5,880.10, a rise of Rs1,254.50.
Distribution system needs $5bn investment
Pakistan has a great potential to grow and its energy market will witness a major expansion in the years to come, said Chinese National Development and Reform Commission (NDRC) Vice Chairman Lian Weiliang.
He was speaking during a meeting with Federal Minister for Power Omar Ayub Khan in Suzhou city on Friday.
He assured the minister that China would continue to complement Pakistan’s efforts to reform and expand its energy sector.
Khan appreciated Lian for inviting Pakistan’s delegation to attend the Belt and Road Energy Ministerial Conference in Suzhou on Thursday.
Oil imports may reach $20bn if prices stay at current level
The annual oil import bill of Pakistan could go as high as $20 billion in the current fiscal year if the existing price trend persisted in the world market, cautioned Shell Pakistan Chief Executive Officer Haroon Rashid on Wednesday.
Speaking at the Energy Forum 2018, Rashid suggested to the government to extend the oil credit facility from 30 to 90 days, which would defer payment of $2 to $4 billion at a time when Pakistan was seeking a bailout package from the International Monetary Fund (IMF) due to dwindling foreign exchange reserves.
He said the oil sector had witnessed a significant change as previously only three oil marketing companies were operating, which now reached 25. The oil import bill was $12 billion in 2017, which would reach $18 to $20 billion in the current fiscal year if crude oil prices stayed at the existing level, he added.
The CEO said if pipeline infrastructure was upgraded in the country, it would lead to savings of $50 to $100 million, which would be passed on to consumers. Earlier, high-speed diesel was being pumped through the pipeline and now motor gasoline will also be transported through it.
Pakistan had average stocks of 20 days of petroleum products, he said and suggested that storages should be built through joint ventures to enhance the capacity.
The Shell chief said Pakistan was selling gasoline at the lowest rate compared with the rest of the world, but the question was whether a country like Pakistan could collect more taxes on its sale. “If taxes are increased on this product, there will be additional collection of $200-300 million in revenues.”
Also speaking at the Energy Forum, Minister for Petroleum Division Ghulam Sarwar Khan pointed out that the country would be facing a gas shortfall in December due to its growing demand from domestic consumers.
He said gas utilities were facing a revenue shortfall of Rs150 billion while 19 licences had been given for oil and gas exploration but no development had taken place in that regard.
The government would frame short, medium and long-term policies for energy projects, he said, adding past governments depended on thermal generation and agreements with independent power producers (IPPs) lacked transparency.
Despite big Chinese investment, FDI drops 43pc to $439.5mn
Foreign investors have held back new investment plans as they wait for clarity on the economic front in Pakistan. The current government is still mulling over options to fix the faltering economy. Foreign direct investment (FDI) dropped 43% to $439.5 million in the first three months (July-September) of the current fiscal year compared to $765.2 million in the same period last year, the State Bank of Pakistan (SBP) reported on Thursday.
Conflicting reports on whether Pakistan would avail the International Monetary Fund (IMF) bailout have confused foreign investors. There were doubts whether Pakistan would again contact friendly countries to borrow funds or would exercise both the options, including the IMF bailout, to avoid default on import payments and debt servicing. This hampered fresh investment flow into Pakistan.
“Majority of our (OICCI) members have replied in an investment survey conducted recently that they will make higher investment this year than the previous year and the growth in investment numbers will be in double digits,” he said. Foreigners have continued to slow down investment in Pakistan since political instability erupted following disqualification of former premier Nawaz Sharif in July 2017 and in the run-up to general elections held on July 25 this year. As usual, China remained the single largest foreign investor in Pakistan during the month as it continued to inject capital under $60 billion China-Pakistan Economic Corridor (CPEC) projects.
China’s share in the month stands at a massive 70%, or $106.6 million, out of total FDI of $151.3 million, according to the central bank. The United Kingdom was the second largest investor with net FDI of $13.8 million, while the Netherlands came on the third position with net $10.4 million investment. Hungary invested $10.1 million during the month. Norway divested a net $20 million while Kuwait divested $3.9 million in September. Construction sector witnessed the single largest inflow of FDIs (net) worth $74.5 million, followed by power $31.4 million. Financial business attracted $16.8 million, while oil and gas exploration sector received $13.8 million in the month.
Pakistan eyes boosting medicine exports to $2bn
The Drug Regulatory Authority of Pakistan (Drap) has assured the pharma industry that in order to further facilitate exports, the authority will establish a separate desk where all concerns of exporters regarding issuance of necessary documentation will be addressed.
Pharma exports are currently earning $230 million with potential to expand up to $2billion.
A meeting was held on Thursday under the chairmanship of Federal Minister for Health Services Aamir Mehmood Kiani with pharmaceutical exporters. The purpose of this meeting was to discuss mechanisms to boost volume of pharmaceutical and alternative medicine exports.
The federal minister in response to concerns of the pharma industry, being represented by the Pakistan Pharmaceutical Manufacturing Association and top 20 pharma exporters of Pakistan, emphasised on the need of harmonisation and facilitation of pharma export by engaging customs and the Trade and Development Authority of Pakistan (TDAP) for resolution of their grievances.
He said the sector has huge potential and needs harvesting to benefit the country by earning money abroad through improved exports of pharmaceutical and alternative medicine. It was also apprised the industry could expand its volume of exports as the 6th largest sector contributing to the overall exports of Pakistan.
Kiani advised stakeholders to submit a working paper on how export volume can be improved. Following which, CEO DRAP, Dr Sheikh Akhter Hussain apprised the federal minister that DRAP has already taken initiative to facilitate local manufacturers who are exporting to other countries.
Government mulling over export of surplus wheat
With the rapidly declining foreign exchange reserves, the Pakistan Tehreek-e-Insaf (PTI) government has begun working on a plan to export surplus wheat in a bid to shore up the reserves.
Earlier, the government had allowed sugar export to dispose of the commodity’s surplus and earn foreign exchange. In a fresh development, the government now wants to allow wheat sales in overseas markets.
Sources told that a proposal about wheat exports was floated by Adviser to Prime Minister on Commerce, Textile, Industry and Production Abdul Razak Dawood in a recent meeting of the Economic Coordination Committee (ECC).
Dawood emphasised that surplus wheat in the country should be exported in an effort to arrest the swift decline in foreign currency reserves as well as save storage cost of the commodity. “In this regard, I will hold a meeting with all stakeholders and apprise the ECC of viable recommendations,” he said.
The ECC directed the adviser to have the cost of surplus wheat storage calculated with a view to determining whether export subsidy should be considered.
The PTI government is also working on a plan to enhance the wheat support price to encourage the farmers to plant additional area with the staple crop, which will ensure food security in the country.
The proposal was floated earlier by the Minister for Petroleum Ghulam Sarwar Khan in an ECC meeting held on September 10.
He pointed out that the storage capacity of warehouses was inadequate, due to which a substantial quantity of wheat had been damaged in Rawalpindi. He called for enhancing the storage capacity.
The petroleum minister endorsed views of the railways minister, saying wheat was not being purchased at the support price and poor farmers were suffering a lot. He underlined the need for undertaking a review of the support price.
The ECC agreed to the proposal and directed the Ministry of National Food Security and Research to submit a summary regarding the support price after consultation with all stakeholders.
In a recent meeting of the economic decision-making body, Dawood stated that due to the drop in international sugar prices, the industry was demanding permission to start sugarcane crushing at full capacity by November 30, which was two weeks late from the set date of November 15.
The ECC noted that the decision on the beginning of sugarcane crushing by November 15 was taken after thorough discussions and consensus among participants of the meeting with a view to ensuring a fair relationship between the sugar industry and the farming community. It was also noted that the decision had also been ratified by the cabinet.