ECONOMIC TIMES OF PAKISTAN
ADB accepts $235mn loan for Karachi bus rapid transit
Pakistan will get a $575 million loan to build red line bus transit system in Karachi that will facilitate 300,000 commuters every day in the country’s largest metropolis.
As part of the $575 million financing envelope, the Asian Development Bank (ADB) on Friday approved a $235 million loan for the bus rapid transit (BRT) system, according to an official handout issued by the local office of the Manila-based lending agency.
The Asian Infrastructure Investment Bank and the Agence Française de Développement (AFD) will separately approve $100 million each for financing the project’s civil works and equipment costs. In addition to that, the Green Climate Fund will provide $49 million.
In 2016, when Pakistan got $9.7 million from ADB for project preparation, its total cost had been estimated at $220 million. At that time, ADB had a plan to lend $100 million for project financing.
Earlier, the World Bank also approved $382 million for construction of 21-km long yellow corridor in Karachi.
The Karachi Transformative Strategy of the World Bank has put the infrastructure needs of the city at $9-10 billion over a period of next 10 years. This money was required to improve urban transport, water supply, sanitation and municipal solid waste treatment.
The Karachi Bus Rapid Transit Red Line Project will deliver the 26.6-kilometre Bus Rapid Transit Line Red Line corridor and associated facilities benefiting as many as 1.5 million people (10percent of Karachi’s population) who live within a kilometre of a Red Line BRT station, said a statement issued by the ADB.
Over 300,000 passengers per day are expected on the Red Line BRT routes. ADB will partially administer two $100 million loans from the Asian Infrastructure Investment Bank and the Agence Française de Développement to jointly finance the project’s civil works and equipment costs.
PM aide tells no need for more hike in gas rates
There is no need to increase gas prices further as recent hike is enough for gas companies to meet their operational expenditures, said Adviser to Prime Minister on Petroleum Nadeem Babar.
Talking to media on Friday, he said that since Liquefied Natural Gas (LNG) was being used to meet the shortfall, there was a possibility that in future, a rate hike in LNG would affect the price mechanism.
“Imported gas is linked with global price fluctuations so any hike in future LNG prices may affect local gas prices too,” he said. “Previous LNG deals with Qatar have been signed, but for future contracts we are in talks with concerned authorities to provide gas on deferred payments, their rates will be much better than previous deals.”
The adviser said that the IMF never demanded the government to increase gas prices
“It only asked us to provide details of the cost and how to recover that cost as circular debt in both gas companies accumulated to Rs168 billion as of June 2018,” he said.
He was of the view that it was necessary for Pakistan to increase its gas resources to keep prices in control.
“In the past five and a half years, not a single tender of drilling was floated,” he lamented. “In our tenure, we have floated tenders for five blocks and will open up another 35 blocks in a year’s time.”
He further said that the government has consulted with concerned companies regarding the difficulties they face while obtaining and executing drilling tenders. He revealed that the department has identified six changes and amendments would be made soon to streamline the gas drilling process.
Regarding new LNG terminals, he lauded that at least five global companies were interested in establishing new LNG terminals and the government was looking for four new RLNG terminals out of which three would be in Karachi and one would be in Balochistan.
PKR likely to continue downward trend
The rupee is expected to continue losing its value against the US dollar in short-to-medium run, as the stringent conditions on which the International Monetary Fund (IMF) has formally approved the bailout of $6 billion for Islamabad would keep mounting pressure on the local currency.
The rupee lost Rs0.36 to Rs156.92 to the US dollar in the inter-bank market on Friday, ahead of some stringent conditions.
The conditions include making rupee-dollar exchange rate fully free-float and the government would make no interference in setting up gas and power tariffs with the objective of bringing circular debt to zero, going forward.
Earlier, the local currency had regained 4.56percent, or Rs7.49, in the previous four consecutive working days (June 28 to July 4) on expectation of increase in supply of dollars in the economy, as Qatar deposited $500 million into the State Bank of Pakistan’s (SBP) foreign currency reserves and IMF was also expected to immediately release the first tranche of $1 billion of the total $6 billion bailout package approved on July 3.
“The rupee is likely to remain under pressure against the US dollar over the next six to eight months,” Arif Habib Limited Head of Research Samiullah Tariq said.
IMF press release carries “tough language (conditions for the bailout),” he said.
He said the statement give an impression that Pakistan would continue to face dollars shortage, as inflows would remain lower than outflows, going forward.
“The rupee would remain under pressure till inflows and outflows stand equal in the system,” he said, adding that Pakistan needs to further reduce imports by at least 10percent over the next six to eight months and increase exports and remittance by a cumulative 10-15percent.
He said that Pakistan is to pay a huge sum of foreign loans over the next two to three years. The situation would keep pressure on the rupee.
Punjab-govt finalises plan for development
The Punjab government has developed the ‘Punjab Jobs and Competitiveness Programme’ with the assistance of the World Bank to support sustainable economic development in the province, said Punjab Minister for Finance Makhdoom Hashim Jawan Bakht. Addressing a departmental meeting at the Planning and Development Board Punjab, he said Punjab Spatial Strategy (PSS) is one of the key components of the programme, adding that the Punjab Cabinet had approved PSS to give effect to spatial planning regime in the province. Using new technologies and strategies for geospatial data, Punjab can exploit alternative information sources such as acquiring remotely sensed data in addition to using conventional survey technology, Bakht added. The minister highlighted that PSS was a long-term spatial planning framework for Punjab. These spatial policies will take key aims of the PSS forward and also ensure alignment of public sector investments and spatial governance in sector of environment, agriculture, irrigation, industries and cities, the minister added.
Government stops drive to recover $7.5bn from offshore accounts
The Pakistan Tehreek-e-Insaf (PTI) government has stopped chasing people who have stashed $7.5 billion in 152,000 offshore bank accounts and whose names have been shared by the Organisation for Economic Cooperation and Development (OECD) with Pakistan.
After January this year, the Federal Board of Revenue (FBR) did not issue any notice to the people who had offshore bank accounts, Mohammad Ashfaq, Director General of International Taxes of the FBR disclosed in a meeting of the National Assembly Standing Committee on Finance. Asad Umar, former finance minister, of the PTI presided over the standing committee meeting.
In September last year, the OECD had shared information about over 152,000 bank accounts owned by Pakistani nationals with the tax authorities. The FBR processed only those bank accounts where deposits were in excess of $500,000 or Rs80 million.
The maximum deposit in one account was $137 million (Rs22 billion), said the director general.
Ashfaq said $7.5 billion was deposited in these 152,000 accounts and over $4.5 billion was owned by just 650 people.
He further said the FBR could trace only half or around 325 of the total 650 people and served them tax notices. “But over 60percent of the 325 people had already availed the last tax amnesty scheme,” said the director general.
“When the government started talking about giving another tax amnesty in January, we stopped sending notices to these people,” said Ashfaq to the surprise of the committee. He also acknowledged that the FBR could not provisionally assess the income of these people for tax purposes.
“Basically what are you saying is that the government has abandoned the OECD exercise,” remarked Umar, Chairman of the NA Standing Committee on Finance.
IMF: Pakistan will get $38 billion to meet financing needs
Pakistan will receive $38 billion in new foreign loans under the International Monetary Fund (IMF) umbrella to meet its mounting external financing needs, the global lender said on Thursday.
Most of these loans will be consumed in repaying the debt piled up by the previous as well as the current political dispensation.
“The approval (of the IMF programme) will unlock from Pakistan’s international partners around $38 billion over the programme period,” the IMF said in a statement.
The international financial institution also projected a 13percent inflation rate at the end of current fiscal year — which means that the State Bank of Pakistan (SBP) will increase the interest rate to over 15percent.
The IMF has not clarified whether the $38 billion borrowings will be sufficient to meet all financing needs of the country during the three-year period.
Independent estimates have put the total financing requirements at $55 billion to $60 billion during this period. The amount of $38 billion is inclusive of the $6 billion IMF package.
Giving a break-up of the loans, Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh on Thursday said $14 billion loans would be in the shape of a rollover of the previous loans.
“Pakistan will obtain $8.7 billion project loans, $4.2 billion in budgetary support and another $8 billion will be secured from commercial banks and foreign capital markets,” he said at a news conference at his office.
The macroeconomic table that the IMF released after the approval of the programme shows that by the end of this fiscal year, the public and publically guaranteed debt will peak to 80.5percent of the GDP.
In absolute terms, the public and publically guaranteed debt will be nearly Rs36 trillion — a net addition of Rs11 trillion within two years of the current government.
US companies keen to invest in Pakistan
The perception of Pakistan in the international market is improving as US firms and investors are looking forward to investing in the country, said US Consulate General Karachi Economic Unit Chief Chad Miner.
Addressing a meeting organised by the Korangi Association of Trade and Industry (KATI), Miner said Karachi is a lively city and the image of the country is changing. He said that Prime Minister Imran Khan has promised positive measures and has shown serious intent to bring reforms in Pakistan’s economic system. Owing to these positive measures, American companies are now looking forward to opportunities in Pakistan, he added.
Speaking on the occasion, KATI President Danish Khan said, “US is the largest trade partner of Pakistan. We look forward to expanding this relationship for the mutual interest of both countries.”
He urged relaxation in tariffs for Pakistani products, adding that after effective measures to reinstate law and order and curbing money laundering, the business environment of Pakistan has gotten far better. Identifying areas, he said there was potential in agriculture, livestock, and food processing and seafood sectors for US companies.
Also present in the meeting, KATI standing committee on diplomatic affairs head Masood Naqvi said the US has invested enormously in social and development sector of Pakistan, which should be appreciated.
“We should reconsider the strategy; social indicators can only be improved with industrialisation and economic prosperity.” To improve business-to-business relations and interaction of both countries, US should reconsider its travel advisories for its citizens, he stressed.