Homegrown 5-year economic stabilisation programme
The government has decided to present a ‘homegrown’ five-year economic stabilisation programme in the National Assembly in the third week of this month that this time is expected to mirror the economic priorities of the ruling party.
This reflects a slight departure in the approach of the Finance Ministry that had earlier prepared next three fiscal years plan while keeping in mind requirements of the International Monetary Fund (IMF) for the three year period, said sources in the Ministry of Finance. The next three-year plan for the period from the fiscal year 2019-20 to 2022-23 had also been shared with the IMF.
The original three-year plan was steep and challenging due to the IMF’s desire to implement most of the difficult policies during the first two years of the PTI government, said the sources. Yet the IMF was not satisfied with these measures, as it wanted that Pakistan should take a majority of the measures in the remainder of this fiscal year and in the next fiscal year, said the sources.
The sources said that there were dissenting views within the ruling party, as some senior party members wanted to take a different line of action. They wanted the Finance Ministry to adopt an incremental approach for increasing tax revenue while simultaneously supporting economic growth by setting relatively relaxed budgetary targets.
Now, the Finance Ministry has been instructed by Prime Minister Imran Khan to prepare a five-year plan until the fiscal year 2022-23 while keeping these priorities in mind, said the sources.
CDWP fails to plan revised cost of Nai Gaj Dam
A day before the end of the Supreme Court’s deadline, the federal government cleared the Nai Gaj dam project on Thursday without reaching decision on its actual revised cost and source of financing for the project that is facing significant delays.
The Central Development Working Party (CDWP) recommended the Nai Gaj dam scheme for final approval of the Executive Committee of National Economic Council (Ecnec).
The CDWP, which is headed by the planning minister, has the mandate to approve only up to Rs3 billion worth of schemes. The CDWP recommends all those projects that have a higher cost to Ecnec for final approval. In total, the CDWP referred three schemes costing Rs202 billion to Ecnec for final decision.
“The Nai Gaj dam’s second cost revision worth Rs46.5 billion was referred to Ecnec for its final approval,” said a statement issued by the planning ministry.
Trade deficit shrinks 5percent to $16.8bn as imports go down
The trade deficit in first half of the current fiscal year shrank 5percent to $16.8 billion on the back of numerous measures to squeeze imports but exports could not pick up pace despite a steep currency depreciation of 33percent in the last one year.
The trade deficit, which stood at $17.7 billion in July-December 2017, shrank 5percent to $16.8 billion in the corresponding period in 2018, stated the Ministry of Finance in a late-night press statement.
It was unusual that the finance ministry issued a statement to announce the trade figures as the data is periodically released by the Pakistan Bureau of Statistics.
Overall imports during July-December 2018 shrank by over 2percent or $700 million to $28 billion, it added. The finance ministry said the trend was even more pronounced in respect of imports under the regulatory duties’ regime. The import value declined from $5.2 billion in July-December 2017 to $4.4 billion in July-December 2018, showing a contraction of 16percent, it added. The government’s policy measures have resulted in narrowing of the trade deficit, decline in imports and increase in exports which augurs well for the overall balance of payments of the country, said the finance ministry. However, the results are not very encouraging when it comes to exports, which is the key reason behind the declining non-debt creating foreign exchange earnings. The exports during the first half of the fiscal year amounted to only $11.2 billion -higher by just 1.8percent or less than $200 million in the first half.
Foreign debt, falling reserves pose major challenges: Moody’s
Moody’s – one of the three main global credit rating agencies –anticipates that Pakistan would continue to fight tough against larger economic challenges such as repaying mounting foreign debt amid rapidly declining foreign currency reserves during 2019.
The US-based rating agency said Pakistan would have to repay foreign debt amounting to over 160 per cent of its foreign currency reserves in 2019.
“Our external vulnerability indicator (EVI) reading for…Pakistan and Sri Lanka….exceeds 160percent for 2019, indicating that total public and private external debt due over the next year is larger than foreign exchange reserves,” Moody’s Investors Service said in a commentary on ‘Sovereigns – Asia Pacific 2019 outlook stable as domestic strengths counter rising external, policy uncertainties.’
It did not mention what was the debt repayment-to-reserves ratio for the year ended December 31, 2018.
In June 2018, the agency downgraded Pakistan’s credit rating from ‘stable’ to ‘B3 negative’ after it found the country’s foreign currency reserves were insufficient to pay back its foreign debt.
“Low foreign exchange reserves to cope with balance of payment pressures raise external vulnerability risks in Pakistan (B3 negative) and drove our change in the rating outlook in June to negative from stable,” it said in the report, which analyses the economic outlook of around two dozen countries around the world.
The agency, however, did not hint at any future changes in the country’s credit rating.
Foreign exchange: SBP reserves decline 3.28 pc, amount to $7.05bn
The foreign exchange reserves held by the central bank dipped 3.28percent on a weekly basis, continuing to go down for the third consecutive week, according to data released by the State Bank of Pakistan (SBP) on Thursday.
The falling reserves raise concern about Pakistan’s ability to meet its financing requirements. Earlier, Saudi Arabia provided financial assistance to Pakistan, which pushed the reserves above $8 billion but they later started falling again.
Moreover, the third $1-billion loan tranche from the kingdom is expected to arrive next month. Separately, China has agreed to provide much-needed support for the fast depleting reserves.
On January 4, the foreign currency reserves held by the SBP were recorded at $7,048.7 million, down $239 million compared with $7,287.5 million in the previous week.
Remittances fall due to international economic slowdown
The remittances sent home by overseas Pakistani workers have remained sluggish mainly due to global economic slowdown, particularly in the Middle Eastern region where majority of the Pakistanis reside.
The sluggish remittances, which remain a big source of Pakistan’s foreign earnings used to specifically finance imports and debt repayments, will pile on the pressure on the already low foreign currency reserves of the country.
Overseas workers sent home $1.69 billion in December 2018, which was almost 2percent lower than the $1.72 billion received in the same month of previous year, the State Bank of Pakistan (SBP) reported on Thursday.
The decrease widened the gap between the realised remittances and the target of $22 billion for fiscal year 2018-19. The drop comes despite the fact that Pakistan has let the rupee go down by a massive 32percent against the dollar in the past 13 months to attract higher remittances through legal banking channels and a crackdown on the illegal Hawala and Hundi system.
World bank to lend $100mn for Sindh energy project
Pakistan and the World Bank on Wednesday signed a financing agreement worth $100 million for the Sindh Solar Energy project, aimed at increasing solar power generation and access to electricity in the province.
The financing agreement was inked seven months after loan approval by the Washington-based lender’s board of directors. Pakistan will return the loan in 30 years with a five-year grace period.
The project will support the deployment of solar power in Sindh spanning three market segments – utility scale, distributed generation and at the household level, according to a statement issued by the finance ministry.
The utility scale included development of solar parks to support private-sector investment and the launch of Pakistan’s first competitive bidding for solar power production, starting with an initial 50-megawatt pilot solar auction, it added.
Distributed solar generation includes at least 20MW of distributed solar photovoltaic (PV) panels on rooftops and other available space in and around public-sector buildings in Karachi, Hyderabad and other districts of Sindh. Solar energy systems will be provided to 200,000 households in areas with low or no electricity access. World Bank warns brewing trade storm jeopardises global economy Overall, the project is aimed at supporting independent power producers to develop 400MW of new solar power capacity – starting with an initial 50MW pilot project – and provide partial grants to private-sector firms for the commercial provision of solar home systems to 200,000 households. The project will also help gain knowledge and experience of developing solar PV schemes in and around public buildings.
Pakistani companies receive good response at Heimtextil
Pakistani companies participating in the Heimtextil 2019, an international trade fair for textile goods, are receiving a tremendous response.
International buyers, especially those from European countries, have expressed keen interest in the home textile, bed wear and towel products made in Pakistan.
Pakistani companies are hopeful that 2019 would be a positive year for the country’s exports and the national economy, especially the textile industry, following the announcement of concessions and supportive policies by the government.
According to Gul Ahmed Textile Mills Chairman Muhammad Bashir, positive response was received right from the very start of the exhibition as a large number of international buyers expressed interest in Pakistani products.
“Owing to depreciation of the rupee, we are getting great support while the reduction in gas prices has also put exporters in a good position,” he said, adding that “now the problem is only about the level of supply and we hope the issue will be resolved in a month”.
He, however, pointed out that protests in France and Britain’s upcoming exit from the European Union had posed challenges to the exporters, but they could overcome such problems through effective marketing and attractive prices.
“Large-scale exhibitions like Heimtextil help exporters gain key information about market trends,” he remarked.
Umar Salahuddin, a Pakistani representative in the organising team of the exhibition, said key buyers of Pakistani products at the Heimtextil 2019 would be from the US, Japan, Europe and Britain, which would give Pakistani textile manufacturers a great opportunity to gain access to a large number of buyers.
Fazal Alwani, who had been participating in the exhibition for the past 15 years, expected Pakistan to face stiff competition from India and Bangladesh.
Pakistan’s regulatory duty hurts Sri Lanka’s exports
Sri Lankan Consul General GL Gnanatheva has lamented that the imposition of regulatory duty by Pakistan has terribly impacted Sri Lanka’s exports to Pakistan.
The consul general expressed the displeasure while highlighting a few hurdles obstructing smooth trade between Pakistan and Sri Lanka during a visit to the Karachi Chamber of Commerce and Industry (KCCI) on Thursday.
“Because of the imposition of regulatory duty, Sri Lankan exporters are reluctant to further enhance trade or explore Pakistani markets,” he elaborated.
“Although a massive potential exists to improve trade ties, our exporters are unwilling to take any additional initiatives and we are unable to convince them due to Pakistan’s uncertain trade policies.”
Gnanatheva underlined the need for collective efforts by both the nations to lift the existing trade volume. Pakistan and Sri Lanka should explore more trade opportunities and define a clear road map for growth in trade, investment and exports, he added.
SC temporarily allows collection of regulatory duty
Recalling that Sri Lanka was the first country to sign a free trade agreement (FTA) with Pakistan in 2005, he termed it the most successful deal, which provided extensive benefits to business communities of the two sides.
“It has been observed, however, that most of the benefits granted under the FTA remain largely unutilised by both sides,” he pointed out. “Hence, there is a need to organise either a day-long or half-day seminar in which business communities of Pakistan and Sri Lanka will get a perfect opportunity to identify the obstacles.”