ECONOMIC TIMES OF PAKISTAN
SBP reserves drop 2.6pc to $7.1bn
The foreign exchange reserves held by the central bank fell 2.6percent on a weekly basis, according to data released by the State Bank of Pakistan (SBP) on Thursday.
The central bank received the first tranche from IMF of $991.4 million on July 9, after which the SBP’s reserves increased to $8,035.5 million. Earlier, the reserves had spiralled downwards, falling below the $7-billion mark, which raised concern over Pakistan’s ability to meet its financing requirements. However, financial assistance from UAE and Saudi Arabia helped shore up the foreign exchange reserves. On July 5, the foreign currency reserves held by the SBP were recorded at $7,083.6 million, down $189 million compared with $7,272.8 million in the previous week.
During the week, the State Bank received $500 million worth of inflows out of the total promised aid of $3 billion from Qatar. The decline was recorded due to payments on account of external debt servicing, the statement added. Overall, liquid foreign currency reserves, held by the country, including net reserves held by banks other than the SBP, stood at $14,259.3 million.
PKR weakens against $
The rupee weakened against the dollar at Rs157.8/158.3 in the inter-bank market on Thursday compared with Wednesday’s close of Rs157.45/157.95, according to forex.pk. Earlier, the SBP let the rupee depreciate massively in the inter-bank market after finalising an agreement with IMF for a loan programme on May 12. The IMF has asked Pakistan to end state control of the rupee and let the currency move freely to find its equilibrium against the US dollar and other major world currencies.
Trade deficit shrinks 15.3pc to $31.8b in fy19
The Government has managed to narrow down the trade deficit by 15.3percent to $31.8 billion on the back of import compression but it failed to enhance exports, which fell even below the level left behind by its arch-rival – the Pakistan Muslim League-Nawaz (PML-N).
Trade figures released by the Pakistan Bureau of Statistics (PBS) on Friday showed that exports contracted both on month-on-month and year-on-year basis in June despite over one-third depreciation of the rupee against the US dollar. The PTI government missed its export target by $4 billion as total exports stood below $23 billion at the end of fiscal year 2018-19.
It also missed the trade deficit reduction target by $5.8 billion, although the gap between exports and imports shrank 15.3percent.
Overall, the trade deficit, which stood at $37.6 billion in the preceding fiscal year, shrank to $31.8 billion in the just ended fiscal year 2018-19, the PBS reported. In absolute terms, there was a reduction of $5.8 billion in the trade deficit and the entire reduction came from the import side.
Overall imports dropped 9.9percent to $54.8 billion in FY19 but the improvement was mainly because of reduction in machinery imports. In absolute terms, the imports contracted by $6 billion, which provided some relief to the government.
However, the real challenge remained the exports, which registered a negative growth of 1percent and stood at only $22.97 billion, remaining shy of even $23 billion, during the previous fiscal year. In absolute terms, the exports shrank $234 million.
Adviser to Prime Minister on Commerce Abdul Razak Dawood had vowed to enhance exports to $27 billion on the back of steep currency depreciation and market access to China. However, it did not happen.
Dawood had claimed that Chinese market access would boost exports by an additional $1 billion during fiscal year 2018-19.
Exporters have long been getting subsidised loans, electricity and gas, and are exempted from the normal income tax regime. The central bank has let the currency depreciate by over 40percent in a bid to give a boost to exports and curb imports.
The PTI government has provided over Rs30-billion package in the shape of lower gas and electricity prices.
State Bank of Pakistan Governor Dr Reza Baqir said on Thursday there was a need to support the exporters by making them competitive. But “the exchange rate is not the ultimate solution and the ultimate solution has to come from the business by improving competitiveness.”
PM directs BOI to harmonise business laws
Prime Minister Imran Khan directed on Friday the Board of Investment (BOI) chairman to harmonise business-related laws enforced in the federal capital and provinces within a month.
Chairing a meeting of the BOI board of directors, the prime minister also gave directives for streamlining business-related laws in light of the board’s recommendations in order to remove unnecessary conditions.
The meeting was attended by Minister for Energy Omar Ayub Khan, Adviser on Finance Dr Abdul Hafeez Shaikh, Adviser on Commerce Abdul Razak Dawood, BOI Chairman Zubair Gillani, Dr Salman Shah, Dr Shamshad Akhtar, Ahmer Bilal Sufi and others.
The meeting discussed the measures to promote domestic and foreign investment, remove impediments, establish Special Economic Zones (SEZs) and facilitate the industrial sector and business community at federal and provincial levels.
The BOI chairman presented first draft of a proposed new strategy on investment for 2020-24 to the prime minister, which would be finalised in accordance with suggestions of the board members.
The prime minister was apprised that the BOI had initiated the process of bringing harmony among various federal and provincial laws related to the business sector.
The investment board was also mulling over the laws concerning the SEZs to make them business-friendly. The premier said it was among the government’s priorities to encourage and facilitate the investors.
He was of the view that disharmony among federal and provincial laws, unnecessary regulations for businesses and corrupt practices had created trouble for the business community, which also stagnated industrial development.
He said the government was taking full advantage of the huge young population of Pakistan, low-cost workforce and the government’s liberal investment policies, which were providing an atmosphere conducive to investment.
SPI rises 1.35pc
The Sensitive Price Indicator (SPI) for the week ended July 11, 2019 registered an increase of 1.35percent for the combined income group, going up from 259.63 points during the week ended July 3, 2019 to 263.13 points in the week under review.
However, the SPI for the combined income group surged 15.01percent compared to the corresponding week of previous year. The SPI for the lowest income group increased 1.51percent compared to the previous week.
The index for the group stood at 242.74 points against 239.14 points in the previous week, according to provisional figures released by the Pakistan Bureau of Statistics (PBS).
During the week, average prices of 31 items rose in a selected basket of goods, prices of seven items fell and rates of remaining 15 goods recorded no change.
Pak-Turkey trade drops due to protective duties
The volume of bilateral trade between Pakistan and Turkey has dropped drastically from $1.08 billion to $792 million after the imposition of protective duty on textile by the latter.
Previously, textile exports to Turkey were based on normal tariffs, but later Turkey imposed a protective duty of 18percent, which was very high, leading to a decline in textile exports to Turkey, said Federation of Pakistan Chambers of Commerce and Industry (FPCCI) President Daroo Khan Achakzai.
“Turkey should remove local preventive duties in the preferential trade agreement (PTA) and prospective free trade agreement (FTA) with Pakistan,” Achakzai suggested.
He said he appreciated efforts of the government of Pakistan and Turkey to enter into a strategic economic framework (SEF) for enhancement of bilateral relations in trade, tourism, health care, hospitality, industry, education, housing, agriculture, aviation and banking.
Pakistan and Turkey had concluded nine rounds of negotiations, including the SEF, but so far the outcome of talks had not been shared with the stakeholders concerned, he pointed out, adding that the government needed to consult the stakeholders for formulating a list of concessionary items to be included in the FTA with Turkey.
Pakistan expected Turkey, being part of customs union with the European Union, to provide access to the Turkish market under a status similar to the GSP+. This assumption was, however, dashed due to the refusal of Turkey to extend the GSP+ status to Pakistan. Instead, Turkey conducted negotiations on the FTA between the two countries.
The FPCCI president urged the government to help remove all anti-dumping and non-tariff barriers before entering into SEF.
He also underlined the need for activating a train service with Turkey in order to reduce trade cost and transit time as trade through sea was not cost-effective for both nations.
Chinese assure PM to invest $5bn in Pakistan
Different Chinese companies assured Prime Minister Imran Khan to invest $5 billion US dollars in Pakistan in next three to five years as a delegation comprising heads and representatives of 55 Chinese companies met the prime minister on Friday.
After the meeting the PM office issued a statement which said the investment and transfer of industrial set-up by Chinese companies will generate over 50,000 jobs in Pakistan the first year.
“The Chinese corporate leaders with their businesses in multiple areas including small and medium enterprise showed keen interest to invest in Pakistan,” it said.
The meeting was a follow-up of Prime Minister Khan’s visit to China in April where the leadership of two countries agreed to strengthen bilateral relationship in key areas, particularly trade and investment.
Prime Minister Imran Khan welcomed the interest of Chinese companies, saying Pakistan’s diverse areas have immense potential for foreign investment.
He said: Inspired by the strategy of Chinese leadership on peace, governance and poverty alleviation, the government is willing to learn from these experiences to achieve the goals of national prosperity.
Imran Khan said China has always sided with Pakistan in tough times and there is a strong bond of friendship between people of both the countries.
Won’t go back on CNIC condition: FBR
Federal Board of Revenue (FBR) Chairman Shabbar Zaidi on Friday said there is no political hand behind the agitation call given by traders but vowed that the government would not compromise on enforcement of its condition regarding the Computerised National Identity Card (CNIC) numbers.
The top tax chief addressed a hurriedly called news conference a day before the traders would observe a shutter-down strike in major cities against the government’s decision to link sales of goods by manufacturers to seeking CNIC numbers.
He also clarified that the government has not imposed any tax on sale of wheat flour and any increase in prices is because of reasons that have nothing to do with the FBR.
“The government would not back out from two issues of CNIC condition and withdrawal of zero-rating facility for five-export oriented sectors that are agitated by traders and industrialists,” he said.
“The traders’ bodies have political affiliations but I do not see any political hand behind the agitation call by them,” Zaidi said while responding to a question. “There is no central leadership of traders, which is hampering effective negotiations with them,” he added.
He said due to introduction of fixed sales tax regime, the small-sized traders should not be worried about the CNIC condition. Only those persons can collect 17percent sales tax who are registered with the FBR and these are only 47,000 people, he added.
The CNIC is the key documentation measure of imposing a condition whereby businesses need to obtain CNIC from buyers purchasing goods worth more than Rs50,000. It has been criticised by the industry at large. “The CNIC issue has been blown out of proportion to frustrate the government’s efforts to broaden the sales tax net,” said Shabbar Zaidi.