Government to provide forex for CPEC debt repayment
The government of Pakistan is legally bound to ensure the provision of foreign currency for debt repayment to Chinese financial institutions by investors of power plants set up under the China-Pakistan Economic Corridor (CPEC) and for the repatriation of profits by them, says a bilateral agreement. Unlike other independent power plants that are operating under the IPP policy, the power plants being set up under the CPEC umbrella have been ensured preferential treatment. The government of Pakistan and the government of China in November 2014 signed the agreement on CPEC Energy Projects Cooperation that gives legal cover to the rights of investors and their financiers. A working by the Ministry of Planning showed that Pakistan would have to return $40 billion to China in the next 20 years on account of repayment of debt and dividends of the projects established under CPEC. An amount of $7.5 billion will be repaid by the government of Pakistan against $5.9 billion in principal loans taken for infrastructure projects. Out of the remaining over $32 billion, nearly $20 billion will be paid to Chinese financial institutions on account of debt repayment by investors and $11.3 billion will be paid in dividends to the investors of power plants. In response to an article appeared on Wednesday, the Ministry of Planning stated “the energy projects are being executed purely under the Independent Power Producers (IPPs) mode and finances are mainly taken by private companies against their own balance sheets”. It added that the dividends of the energy projects were also based on profit and loss and were subject to an individual company’s financing policies, therefore, CPEC was not imposing any burden with respect to loan repayment and energy sector outflows. The planning ministry did not contest the figures quoted in the story on account of capital outflow due to repayment of the debt taken for setting up the power plants and dividend payments.
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20,000 employees of power firms involved in theft
The Senate Standing Committee on Power was informed that around 20,000 employees of power distribution companies were found involved in theft or other similar activities, and investigation was going on against them. The Senate committee, in a meeting chaired by Senator Fida Muhammad, emphasised the need for zero tolerance in areas having higher electricity theft rates and recommended that power should be provided taking into account the percentage of customers who paid their bills. The committee directed the Power Division to present a sub-committee’s recommendations in the cabinet and decide on carrying out load-shedding in accordance with the bill recovery rates. The meeting was informed that boards of distribution companies were free to tackle theft cases and there was no interference from the ministry. Moreover, it urged the companies to approach the committee if any matter relating to theft, losses and interference needed the panel’s intervention. Discussions of the committee were centered around outsourcing some distribution networks to the private sector, providing proper power connections in tribal areas, pending payments to the Sindh irrigation department for work on the Guddu barrage and taking to task employees of Wapda and distribution companies involved in electricity theft. Committee members were told that distribution companies across the country had around 120,000 employees, of which around 20,000 were found involved in theft or other heinous activities.
Pak sets to issue ‘panda bond’ in chinese currency
The federal cabinet on Thursday approved the issuance of Pakistan’s first renminbi-denominated bonds to raise loans from Chinese capital markets, as the country gradually moves towards giving the Chinese currency a status at par with that enjoyed by the US dollar. The cabinet approved the issuance of the maiden renminbi-denominated ‘Panda Bonds’ during its meeting presided over by Prime Minister Imran Khan. The Finance Ministry did not seek the cabinet’s nod for the size of the bond at this stage, although it expects to raise $500 million to $1 billion in different tranches. At least one tranche is expected during the current fiscal year. Finance Minister Asad Umar told the federal cabinet that the interest rate may range above 5.5% but the final price can only be determined at the time of launching the bond. The Philippines has also raised RMB1.46 billion through renminbi-denominated bonds at an interest rate of 4.75%. Since the Asia Pacific nation has better credit rating than Pakistan, the country will have to pay nearly 1% higher. The approval for issuing bonds in the Chinese capital markets came on the heel of the Finance Ministry’s decision to delay issuance of US dollar-denominated Eurobonds worth $3 billion. The government successfully continues its multipronged approach for bridging the foreign financing needs and building foreign exchange reserves, said Dr Najeeb Khaqan, the spokesperson for the Finance Ministry, while commenting on the development. He said that the Panda Bond’s approval by the cabinet was part of this strategy. This is a well-thought-out decision after several rounds of discussions with Chinese banks, investment groups, regulatory authorities and stock exchange and traditional financial advisers, he added.
Ahead of 2022 world cup: Qatar to hire more workers from Pak
Qatari Ambassador Saqr bin Mubarak Al-Mansour said on Thursday that Qatar aimed to hire more workers from Pakistan for building infrastructure projects ahead of the 2022 Fifa World Cup. After inaugurating the first visa centre in Islamabad, the ambassador pointed out that Qatar had decided to raise the number of Pakistani workers in the Gulf country by hiring professional and semi-professional workers, who would assist in ongoing infrastructure projects. He pointed out that Qatar had decided to include Pakistan in the first eight countries where Qatar would have two visa centres. In Pakistan, the visa centres will be in Islamabad and Karachi. Qatar says it is opening these facilities in order to facilitate recruitment of skilled labour from Pakistan as well as to provide required visa services for visit and residence purposes in the Arab nation. These centres will ensure speedy completion of special process for the issuance of visas and residence permits in Qatar.
Government rationalising tariffs to promote industrialisation
Adviser to Prime Minister on Commerce, Textile, Industry, Production and Investment Abdul Razak Dawood has said that the government is working on rationalising the tariff and duty structure in the next mini-budget, which will be presented in January 2019. “It will facilitate the growth of industrialisation as current tariffs and customs duties are unfavourable for the industry,” he said while speaking to businessmen at the Islamabad Chamber of Commerce and Industry (ICCI) on Thursday. After tariff rationalisation, he announced, the government would aim to keep tariffs at same levels for three to four years in order to provide a transparent future roadmap for the industry. “The new tariff policy will be industrialisation-driven and not revenue-driven,” he declared, adding “in the last 10 years, Pakistan saw de-industrialisation and increase in trading due to unfavourable policies of past governments.” However, he emphasised that the current government was determined to reverse the process and put the country on the path of sustainable industrial growth. Dawood pointed out that Pakistan depended on textile for export revenues but its share in the international market was gradually going down.
Due to rupee’s decline: profit, dividend repatriation drops 45%
The repatriation of profits and dividends by multinational companies in Pakistan to their homeland has dropped significantly mainly due to massive depreciation of the rupee, according to experts.
Besides, an ongoing slowdown in the domestic economy has also impacted the growth in repatriation of profits and dividends. The repatriation dropped 45% to $171.9 million in November 2018 compared to $313.7 million in the same month of last year, the SBP reported on Thursday. “Rupee depreciation (against the US dollar) left a major impact on repatriation,” Arif Habib Limited Head of Research Samiullah Tariq told. The rupee has weakened by a massive 32% to Rs139.05 against the US dollar as on November 30, 2018 compared to Rs105.5 on November 30, 2017. Therefore, the drop in repatriation of profits and dividends is the direct result of rupee depreciation as multinational firms earn in local currency and dispatch profits and dividends mostly in dollars to their headquarters abroad. Additionally, some sectors of Pakistan’s economy and companies have announced lower dividends due to the ongoing slowdown in the economy and some sector-specific issues.
Nepra slashes power tariff by rs 0.31/unit
The National Electric Power Regulatory Authority (Nepra) on Thursday approved a tariff reduction of Rs0.31 per unit on account of fuel cost adjustment for November 2018. The regulator took the decision at a public hearing. Consumers will be reimbursed Rs2 billion in the electricity bills of next month. The reference fuel cost was set at Rs5.04 per unit but the actual price came in at Rs4.71 for November, showing a reduction of Rs0.33 per unit. The Central Power Purchasing Agency-Guarantee (CPPA-G) had requested the regulator to allow for the adjustment of Rs5 billion. However, Nepra decided to verify claims before taking any decision on the adjustment. The adjustment will be available to domestic consumers throughout Pakistan, except for K-Electric consumers. Domestic consumers using up to 300 units per month will also be excluded from the adjustment. In the past, there was more use of high-speed diesel in power plants, adding billions of rupees to the energy costs borne by consumers. However, a major decline in power tariff came as a result of no consumption of high-speed diesel and less use of furnace oil later.
Govt rules out change in auto development strategy
The government on Thursday informed the Senate Standing Committee on Industries and Production that it would not bring any changes in the auto policy announced by the previous Pakistan Muslim League-Nawaz (PML-N) government. The committee, in a meeting presided over by Senator Ahmed Khan, was told by Adviser to Prime Minister on Commerce, Textile, Industry, Production and Investment Abdul Razak Dawood that the Pakistan Tehreek-e-Insaf (PTI) government would continue to enforce the Auto Development Policy (ADP) 2016-21, which was announced in March 2016. “We will focus on increasing vehicle production in the country as Pakistan is a big country; demand is high while production is low,” he declared. The committee was told that 55-70% spare parts of cars were being produced in the country. In the case of tractors and motorcycles, 95% and 85% spare parts were being produced in Pakistan. Replying to a question from Senator Sitara Ayaz who asked whether the government would be giving Greenfield status to Pak Suzuki Motor Company’s proposed $460-million investment, the adviser said among the local companies, Pak Suzuki Motor had asked for changing the investment category under the auto policy.